Tag: chapter 7

median income limits

2023 Median Income Limits to Nail Bankruptcy Means Test in Calif

Posted by Hale Andrew Antico on

Median Income Limits to Nail the Bankruptcy Means Test: New for 2023

The government just updated the numbers for 2023 median income limits. Using median household income, it again got easier to qualify for bankruptcy Chapter 7, because of another means test adjustment. And while bankruptcy may seem to be “just forms,” make sure you check out my list of 12 crucial tips to do or avoid before filing bankruptcy.

The means test for bankruptcy decides who qualifies for Chapter 7 bankruptcy eligibility. The first step of this process is comparing your median household income against the California median income limits set by the Department Of Justice guidelines to see if you earn less than bankruptcy median income limits.

Again, this comparison against the median income is merely the first step, and does not absolutely determine your eligibility for Chapter 7 or not.

March 2023 Update: The numbers for the means test adjust April 1, 2023, and will be used after that until late 2023.

Because of the above statement, these will be the second and updated 2023 median income limits.

The means test limits adjusts over time. So, someone may not qualify according to the bankruptcy means test in one month but after the changes they do, or vice-verse. The last updates were in April 2023 . Below are the April 2023 bankruptcy median income figures to determine who can file Chapter 7 bankruptcy.

Means Test: 2023 Median Income Adjustments

2021 median income limits
2023 median income numbers are much higher than in years past

Every now and then, the government updates the bankruptcy median income limits. They last did it in Apr 2023. Good news: the California 2023 median income numbers are yet even higher, increasing household income for bankruptcy means test qualifying. This means that more people could qualify for Chapter 7 bankruptcy using the California median income numbers below.

2023 Median Income for California Households

Because the California median income changes maybe once or twice a year, these recent changes will be the 2nd and updated numbers used for 2023 median income. You’ll see below there’s talk about household size. Notice also that larger families also get a break, as the amount for each additional member after 4 increases another $9,900. This is helpful for households of five people or more.

What is Median Household Income: Roommates and Spouses

When reviewing median household income, we start splitting hairs, since not every home is a traditional household. So, things start getting kind of cloudy on what is or isn’t a household. It isn’t always clear who counts in a household.

Note that if you’re married in California, there’s a community property presumption that your spouse’s income is yours also. So add that, and them, to your household figures. Yes, you can file bankruptcy without your spouse. However, their income, assets, debts, and everything else of theirs still comes into your bankruptcy. Why? California is a community property state. Read more for a deeper dive in my article about spouses and filing bankruptcy.

There may be a difference if you have a roommate who pays rent. What if you’re married? Separated? Or have kids but they’re adults. Do you live with your significant other, who has their own finances? Would the answer be different if you had kids together, but weren’t married? Maybe they’d all be considered by the government to be in your household. Or, maybe they’re not.

You can see this is isn’t as simple as it may at first seem. Contact me and set up a Zoom to talk about it.

But below are the California median income limits for the various household sizes.

California household size and California median income for Bankruptcy
  • 1-person household: $75,235 (up from $69,660)
  • 2-person household: $93,175 (up from $86,271)
  • 3-person household: $104,785 (up from $97,021)
  • 4-person household: $122,707 (up from $113,615)
  • Each additional person: $9,900

These are the California median income numbers effective April 1, 2023. If it’s later in 2023 or you’re looking for the median household income for a different state, please review the DOJ link.

Read Our Means Test Guide.

Means Test Guide

California Means Test Calculator for Chapter 7

Many of you have asked about a Means Test Calculator for Chapter 7. So, I put together the following Chapter 7 means test calculator. For other states, there many be others elsewhere on the internet, this won’t apply. This means test calculator for Chapter 7 bankruptcy is just for California.

Also, this is not intended to give advice or definitively say you qualify for Chapter 7 or not. The actual means test is many pages long, and it’s possible to qualify if your income is over the median. Similarly, it’s also possible to be ineligible for Chapter 7 even though your household income is under the median income. Reducing it to one box is like a cheap parlor game, and you should kind of think of this that way.

But notice how, after you input your income, how changing the household size affects the bottom line. As bankruptcy attorneys, this is something we have to be very mindful about and argue for our clients: the appropriate household size based on the unique circumstances of our clients.

With that being said, here’s my very crude 2023 Means Test Calculator for Chapter 7 for California, which you should take with a massive grain of salt:

Wait! Can you file bankruptcy if your household income is over the median?

If you’re over the bankruptcy median, there’s still hope

Yes. The means test and 2023 median income isn’t the “end all be all.” The above/below median part is just a starting point. A person can still file Chapter 7 bankruptcy, in some cases, even if they earn more than the median income. The bankruptcy means test would just need to be filled out completely. It’s still possible to qualify.

Over the years, this Los Angeles bankruptcy attorney has helped people who earn over the California median income limits still qualify for Chapter 7. In one case, we even helped a family whose annual income was almost double the median household income. They were earning around $150,000 a year, and we helped them get a Chapter 7 discharge (your mileage may vary). However, even if someone isn’t eligible, debt consolidation is still a solution in Chapter 13 bankruptcy.

Being Under the Bankruptcy Median Income Doesn’t Guarantee Success

On the other hand, just because someone is earning less than the California median income, it’s possible that they’re not eligible for Chapter 7 bankruptcy. Bankruptcy is all about whether someone can afford to repay their debt or not, and the means test is just one factor.

Note: the median income numbers are not to be confused with the Los Angeles County median home price figures, and each has a different place in evaluating Chapter 7.

Finally, as the economy is always changing, so does California median household income. We don’t know the next time changes to the median income limits will happen again. So, be sure to check before relying on these California median income limits in the future.

Contact Us and Let’s Find out If you Qualify



    Chapter 7 reaffirmation agreement

    Chapter 7 Reaffirmation Agreement

    Posted by Hale Andrew Antico on

    Chapter 7 Reaffirmation Agreement

    What is a reaffirmation agreement in Chapter 7

    A Chapter 7 reaffirmation agreement is where the evil creditor is trying to get you to owe money after the bankruptcy is over. This is of course a bad thing. But there’s one problem: in some cases, you have to sign the reaffirmation agreement. Note: one advantage of Chapter 13 bankruptcy is no need to reaffirm debts.

    2023 Update: Ride-through is back in California bankruptcy, which significantly impacts the requirement to sign a reaffirmation agreement. This is due to the passage of SB 1099, which has a number of changes in California law to help debtors filing bankruptcy.

    What does it mean to reaffirm a debt?

    To reaffirm a debt is to agree with the lender that you’ll continue owing a debt. You’re basically saying, “I’m good for it.” You’re giving the creditor the power to maybe take things from you and sue you if you ever break the agreement.

    Chapter 7 reaffirmation agreement
    Chapter 7 reaffirmation agreement is a bad idea, but sometimes necessary.

    For years prior to 2005, creditors approached people who filing Chapter 7 bankruptcy with “opportunities” to continue owing the debt. Sometimes, the lender would have a representative approach the debtor at the 341(a) Meeting of Creditors and pressure them to sign. This is, of course, because creditors are, in general heartless and evil.

    Chapter 7 Bankruptcy gets folks out of debt. Reaffirmation agreements stick people with debt. Smart Los Angeles bankruptcy attorneys would just tell their clients not to sign a representation agreement. Unfortunately, people without a bankruptcy lawyer would be intimidated or threatened into signing reaffirmation agreements even though they weren’t necessary, even for cars.

    BAPCPA Changed Reaffirmation Agreements in Chapter 7

    Luckily, to protect debtors from creditors, who are, again, mostly lacking a soul, Congress passed bankruptcy reform in 2005. These changes included Chapter 7 reaffirmation agreements. Now, if someone is financing a car they want to keep, they must sign a bankruptcy Reaffirmation Agreement. Thanks, Congress!

    When To Expect a Bankruptcy Reaffirmation Agreement

    On one of the many many bankruptcy forms you want a Los Angeles bankruptcy attorney to complete for you — the Statement of Intentions — the debtor has to… state… what their… intentions… are with regard to secured debts. A secured debt is one that involves collateral, usually something you’re financing (typically a house or a car). So the form gives people a chance to say what they’re going to do with the collateral. Simplifying, the choices are to keep it or give it back. If you want to keep it, you can expect the lender to send you a reaffirmation agreement. Not because it helps you. But because it gives them an insurance policy against you to whack you with in the future.

    But I need to keep my car in bankruptcy

    Los Angeles bankruptcy filers need a car, and most times if they already have one they want to keep it. Of course you need to keep your car in bankruptcy. If you want to keep a car with no equity in a bankruptcy, you need to do two things: 1) make your payments on time; and 2) complete, sign and return the bankruptcy reaffirmation agreement to the creditor if they send one.

    The Danger about Reaffirmation Agreements

    Beware: if you sign a bankruptcy reaffirmation agreement, and the judge approves it, and then you break it, you will not only lose the collateral, but owe the lender. This means the debt can come back to bite you where you owe thousands or even a lot more months or years into the future.

    Reaffirmation Agreements Are Evil

    So with regard to cars, if you’re going to sign a reaffirmation agreement in Chapter 7, you want to be sure that you can afford the car all the way to payoff and pink slip.

    Risk of not signing the reaffirmation agreement

    Remember the rule: if you want to keep a car that has no equity, you need to stay current on payments and sign the reaffirmation agreement. Why? Because you said you would on your Statement of Intention. And you must follow through on that if they send one.

    But if you don’t do what you said you’d do on the Statement of Intention, you shift the power to the car company. If you don’t sign the Chapter 7 reaffirmation agreement, the car finance company can repossess the vehicle, even if you’re current on payments.

    How much time do I have to do what I said in my Statement of Intentions?

    45 days, per 11 USC 521.

    So What Should I Do about the Reaffirmation Agreement

    Should you reaffirm your debt on the car loan or not? Heck if I know. This is just a website chock full of bankruptcy information, and doesn’t give legal advice. If you need legal advice, retain a Los Angeles bankruptcy lawyer. I happen to know a pretty darn good one (the “best bankruptcy lawyer” oh I don’t know but possibly the best bankruptcy lawyer for you).

    Conveniently, I put a form right next to this so you can contact Los Angeles bankruptcy attorney Hale Antico for your bankruptcy. Note: if you have already filed bankruptcy and have a Chapter 7 reaffirmation agreement, we don’t give advice. That’s just for clients who retained us to file their case.

    I do hope, however, that you find all the bankruptcy information I put on this lawyer website helpful. It really is my hope to demystify the scary unknown that is bankruptcy. Consequently, if it’s really something that would benefit you, you’ll hopefully see that it’s not a mystery but a tool that, when used properly, can be very effective and life-changing, for the better.

      Reaffirmation Agreements and Mortgages

      We haven’t even gotten yet to topic of reaffirmation agreements and mortgages. That is, quite simply, when your mortgage company sends you a reaffirmation agreement in Chapter 7. The law is different with regard to mortgages. The Statement of Intentions, where you again, state your intentions, has a box that lets you keep your house without reaffirming the debt. You have an affirmative duty to act on the intention you stated. And staying current on your mortgage while retaining the property is an option for a house, not a car. This concept is called “ride-through” and went away for cars with BAPCPA in 2005. It still exists for homes. You don’t need to reaffirm a house or give them to right to foreclose on it. Conversely, with cars, that’s exactly what happens.

      Mortgage Reaffirmation Example

      Let’s say you currently have a home valued at $300,000 and the mortgage has a balance of $250,000. You figure you love this house, it has equity, and you will never move and you want to reaffirm your mortgage debt. You sign a reaffirmation agreement in Chapter 7. Your Chapter 7 case finishes. Years go by.

      Oh no! The 2008 mortgage crisis happened again. Your home just lost half its value and you lost your job. It’s now worth $150,000 and you can’t afford the payments.

      If you stop paying, walk away, and let them foreclose on you, they get the house. But guess what they also get, nay, already have. That old Reaffirmation Agreement. They get to use that, even decades later, and go after you for the leftover on the mortgage loan you promised to pay. That can be a debt of well over $100,000 you still owe, and the old bankruptcy doesn’t help you. Why? Because you reaffirmed a mortgage.

      So Why Would You Want to Reaffirm a Mortgage Debt?

      Everyone can agree that even the possibility of owing tens of thousands of dollars at some point after bankruptcy is terrible. Yet, mortgage companies send their own customers these agreements. Why? Because they’re soulless ghouls. In the Central District of California, where this Los Angeles bankruptcy lawyer practices, no judge will approve a mortgage reaffirmation agreement in Chapter 7. Consumer bankruptcy attorneys want to protect their clients, and one way to do that is to not let them sign a Chapter 7 reaffirmation agreement for a mortgage that could end up haunting them twenty years in the future.

      The Postbankruptcy Mortgage Scam

      We’ve established that no sane person that understands what’s at stake would knowingly sign a mortgage reaffirmation agreement in Chapter 7. A bankruptcy attorney wouldn’t want their client to sign one. A judge won’t approve one in Los Angeles bankruptcy court. What can go wrong?

      What happens is, years after the bankruptcy, your mortgage company will tell you that they can’t / won’t perform some service for you. Why? You’re the customer and are paying your mortgage every month! They’ll say, “gee, remember that bankruptcy you filed? We sent you a reaffirmation agreement and your bankruptcy attorney didn’t let you sign it.” That is, because a decent bankruptcy lawyer protected you from them, they now turn around and deny you service, credit reporting, a refi, or some other perk. And it’s all the fault of your bankruptcy attorney, they say. The future you is outraged. “I can’t get a refi because the bankruptcy lawyer wouldn’t let me reaffirm my mortgage, which no judge would ever approve.” The present you understands because you read the example in the yellow box above, but the future you gets spun.

      Why would your mortgage company reject you, deny you some perk, or not report your on-time payments on your future credit report? Why would they punish you because you refused to let them have a hammer to hit you on the head with for a $100,000 debt in the future? Because they’re heartless callous monsters that are looking for a reason to punish you and turn you against the bankruptcy lawyer who protected you from them.

      They didn’t send me a Chapter 7 reaffirmation agreement

      Remember what it is: it’s basically a Motion to Make Debtor Owe a Debt in the Future sent to you by your car or mortgage lender. If they send you one for a car you intend to keep, you need to complete it. If they don’t send you a reaffirmation agreement, you still need to reaffirm within 45 days of the 341(a) meeting of creditors and do what you said you’d do in the Statement of Intentions. Otherwise, they have the right to repossess the vehicle without seeking relief from stay under Sections 521(a)(6) and 362(h).

      If you haven't filed bankruptcy yet, contact us now!

        lien in bankruptcy cars

        Liens in Bankruptcy: The Ultimate Guide, Explained

        Posted by Hale Andrew Antico on

        Liens in Bankruptcy: The Ultimate Guide, Explained

        Liens in bankruptcy typically survive and don’t get affected by the discharge. However, there are exceptions where the lien can be reduced or even eliminated. I try to break these down in simple terms that are easy to grasp. But don’t be fooled: bankruptcy is more complicated than you think. Get a consultation with an attorney, and make sure you check out my list of 12 crucial tips to do or avoid before filing bankruptcy.

        What is a Lien in Bankruptcy?

        A lien is a security interest of a debt that encumbers a thing owned by the borrower until the debt is paid. One common example is a car and the car loan. The borrower who “owns” a car can’t just sell the car outright. He has to pay the debt secured by the lien against the car first. Then, once the debt is paid, the lien is satisfied and removed.

        Section 101(37) of the Bankruptcy Code defines “lien” as:

        charge against or interest in property to secure payment of a debt or performance of an obligation.

        How does bankruptcy affect a lien? The General Rule

        The general rule for liens in bankruptcy (and there are exceptions) is that bankruptcy doesn’t affect a lien at all. If a debt is secured by a lien and collateral, if you wish to keep the asset, then that debt will survive the bankruptcy. You don’t get a free house or car in bankruptcy. Here, let me put that in a fancy quote because it is so important:

        You don’t get a free house or car in bankruptcy.

        – Attorney Hale Andrew Antico

        There is a reason this is emphasized so strongly. For some reason — be it wishful thinking or confusion because the lender stopped sending statements or something else — people sometimes stop paying for a house or car. This is a mistake that can result in foreclosure or repo.

        house lien in bankruptcy
        Not really representative of a lien in bankruptcy, but it shows money and houses so pretend there’s a chain encumbering them.

        If you wish to keep the thing with a lien in bankruptcy (e.g.: your house), then you must continue to making regular payments on the loan or loans that goes with it. With that general principle out of the way, there are some specific exceptions or applications.

        Chapter 7 bankruptcy and Liens

        How does bankruptcy affect a lien in Chapter 7?

        Chapter 7 bankruptcy is the simpler bankruptcy. You don’t normally pay unsecured debts back here. But how does bankruptcy affect a lien in a Chapter 7? The short answer: liens don’t go anywhere. If you started a Chapter 7 with a debt secured by a lien, you will most likely end the Chapter 7 with a lien. Nothing changes. Let’s look at a few different things that come up.

        Vehicles in Chapter 7: You don’t get a free car

        Repeat after me: In Chapter 7 bankruptcy, you don’t get a free car. If you are financing a vehicle, if you want to keep the vehicle, you must keep paying the loan. No matter what happens, you must keep current and paying for the car (or truck or RV or quad or other secured vehicle) if you want to keep it.

        If your bank turns off your online access, you must keep current and paying for the car if you want to keep it. If your bank stops sending you statements or coupons, you must keep current and paying for the car if you want to keep it. If aliens abduct your Aunt Nana, you must keep current and paying for the car if you want to keep it.

        You must be wondering why I’m spending three paragraphs repeating something that seems quite basic. You know, the concept that you must keep current and paying for a vehicle if you want to keep it. This is because no matter how obvious, no matter how many times this is repeated, people still somehow stop paying for their vehicle because they read on some message board on Google Esq. that they get a free car in bankruptcy.

        But that’s false. You know why? Because there’s a lien on the car. And it remains. Why?

        Because you don’t get a free car in Chapter 7 bankruptcy.

        lien in bankruptcy car
        Lien in bankruptcy doesn’t go anywhere with regard to a car in Chapter 7 because you don’t get a free car in bankruptcy.

        Reaffirmation Agreements in Chapter 7

        Definition of Reaffirmation Agreement

        A reaffirmation agreement is an agreement where you … reaffirm a debt. This has the legal effect of you promising to owe a debt after the bankruptcy, no matter what. I think we can all agree that vowing to be liable on a debt regardless of what happens after a bankruptcy is the opposite of what bankruptcy is supposed to be.

        Why on earth would someone say, for example, yes, please, make me owe my mortgage balance even if I ever lose my house to foreclosure? You wouldn’t. Because that’s crazy. That’s what a reaffirmation agreement is: a contract where you make yourself owe a debt after the bankruptcy, regardless of what surprises the future throws at you.

        That is crazy. Why would I ever sign a reaffirmation agreement?

        Good question. You would never voluntarily promise to undo the bankruptcy for a debt on which you are trying to avoid personal liability. Again, it defeats the purpose of bankruptcy to say yes, I’d like to owe this debt after bankruptcy.

        Bankruptcy is intended to get you out of debt. Reaffirmation agreements are intended to get you back into debt.

        But you just told me I’ll owe the car debt after bankruptcy no matter what.

        Not quite. The example above is just talking about payments for a car that you intend to keep. If you want to keep the car, pay for it on time. What we’re talking about now is the possibility you lose the car or house or RV after the bankruptcy.

        Let’s say a year after the bankruptcy is done, an asteroid hits your employer and you lose your job and the can’t pay for the house or car. They repo or foreclose and you lose the thing, right? Right.

        But if you signed a reaffirmation agreement, you not only lost the house or car, but you also owe for the contract for the house or car you no longer have. Why? Because you signed a reaffirmation agreement. Can we agree that’s a bad outcome?

        Holy cow, that’s terrible. Why would I ever sign a reaffirmation agreement?

        You wouldn’t voluntarily sign a reaffirmation agreement unless you had to. And for vehicles, if you want to keep the collateral, you need to stay current on payments and you need to sign a reaffirmation agreement if they send one to you. For mortgages, you don’t generally need to or want to sign one. Any lender that tells you you needed one during your bankruptcy is mistaken, lying, or evil. Probably just mistaken.

        Note: the law is changing in California in 2023 to bring back bankruptcy ride-through. SB1099 will make it no longer a default on a car loan if you don’t sign a reaffirmation agreement for a vehicle.

        522f Lien Avoidance in Chapter 7: Judgment Liens

        Recap of the rule: liens in Chapter 7

        The rule for liens and lien avoidance in Chapter 7 bankruptcy is that the lien doesn’t go anywhere and you don’t get a free house or car in Chapter 7. If you started Chapter 7 with a lien on your car or a second mortgage on your house, you will likely end the bankruptcy with one, as there usually is no lien avoidance in Chapter 7. There can be one exception to this, and you have to qualify for it, contract for it, and yes, usually pay for it: judgment liens.

        Possible Exception: What is a Judgement Lien

        A judgment lien is when someone sues you, and as a result of the lawsuit, the judge rules against you. As a result, there is a now judgment against you. One way to collect on a judgment is a judgment lien against real estate or property you own or have an interest in. In California, the judgment lien cannot foreclose on you and take your house. However, it can sit there and grow with interest until you sell, refinance, transfer, or otherwise try to change the title. Then, it needs to get paid in full.

        Oh no. What is a Judgment Lien Avoidance in Bankruptcy?

        A judgment lien avoidance is where, in some cases, you can remove, or avoid, the judgment lien in bankruptcy… even Chapter 7 bankruptcy. Yes, it’s possible in Chapter 7 bankruptcy to avoid a judgment lien. However, it is not possible in every case, and doesn’t happen automatically. It’s extra work, and unless you contract for (and pay extra for) this extra work, the judgment lien avoidance won’t happen. Plus, the calculations around your home equity and lien amounts have to be right to qualify for it.

        What are the factors to qualify for Judgment Lien Avoidance?

        To qualify for lien avoidance in bankruptcy, we turn to Section 522(f) of the Bankruptcy Code, which says, in part: “the debtor may avoid the fixing of a lien on an interest of the debtor in property to the extent that such lien impairs an exemption to which the debtor would have been entitled.”

        So, for judgment lien avoidance, you need to determine if the lien impairs an exemption. At its core, this is a simple math problem. Here, in the Central District of California, the form we use spells it out pretty clearly, as you can see below.

        522f judgment lien avoidance calculations
        522f judgment lien avoidance calculations from CDCA form F 4003-2.1.Avoid.Lien.RP.Motion

        The factors are pretty self-explanatory:

        • Value of Collateral: that’s what the house is worth
        • First lien: this is usually the primary deed of trust, or first mortgage
        • Amount of Debtor’s exemption: the amount of the exemption Debtor is entitled to

        Lien Avoidance Formula: Take the value of the collateral, then subtract the debtor’s liens which cannot be avoided, and then subtract the exemption amount. That’s the amount that remains to pay judgment liens.

        Still, this can be confusing. Read on!

        522(F) Judgment Lien Avoidance Calculator

        Below is a judgment lien avoidance calculator to help with the math of determining whether a judgment lien is impairing an exemption per 11 USC 522(f). You can only avoid the lien up to the amount it is impairing the exemption. If there is only partial impairment, there can only be partial judgment lien avoidance.

        Timing of amounts used for lien exemption

        If you learned of a judgment lien now but had an old bankruptcy where you didn’t avoid it, you may still be able to avoid the old judgment lien using the old bankruptcy. But exemptions change over time. Which home value and exemptions amount do you use?

        Chapter 13 Bankruptcy and Liens

        Section 506: Lienstripping a junior mortgage, mortgage cramdown, or avoiding a second mortgage lien

        What Does the lienstripping law say?

        There are really a few sections to focus on. First, section 506(d) of the Bankruptcy Code states, generally:

        To the extent that a lien secures a claim against the debtor that is not an allowed secured claim, such lien is void

        Making a lien void is a very good thing, and in Chapter 13 bankruptcy this can sometimes be done. The problem is it can’t be done all the time; the circumstances — and the math — have to be just right. Sometimes Sections 506(a) and 1322(b)(2) come into play in helping define what is secured.

        The 9th Circuit BAP clarified when this can be done in In re Lam, 211 BR 36 (9th Cir BAP, 1997). It was in this major ruling when the Bankruptcy Appellate Panel ruled, “The Nobelman decision holding that section 1322(b)(2) bars a chapter 13 plan from modifying the rights of holders of claims, secured only by the debtor’s principal residence, does not apply to holders of totally unsecured claims.” Id. at 41.

        liens in bankruptcy house
        Liens in bankruptcy regarding a house, this time with a chain encumbering it in rich symbolism.

        So, the key language in Lam is “totally unsecured.” Unlike avoiding a lien under 522(f) which can allow partial removal of a judgment lien, avoiding a consensual lien like a deed of trust or mortgage cannot be partially secured. “…a one dollar difference in property value could have a profound effect on a secured creditor’s rights.” Lam at 41. So the evidence for property value is key, and this can be where all the fight is.

        Lam Lienstrip Examples

        Let’s say Debtor has a home valued at $200,000 with a first mortgage of $225,000 and a second mortgage with a balance of $50,000. Because the second isn’t “touching” the secured house, it is totally unsecured and can be avoided with a lien-strip in a Chapter 13 bankruptcy. However, if that same property were valued at $230,000, then there’s about $5,000 of secured status for the junior mortgage. That’s enough to make it a secured claim, and then, because it’s not wholly unsecured, it cannot be avoided or lienstripped.

        I made a handy calculator where you can test out the above lien stripping examples yourself, and of course, your own numbers to see if it’s totally unsecured and qualifies in the Ninth Circuit for lien avoidance under Lam.

        If you are in the Los Angeles, Ventura, or Orange County, contact me and let’s go over your options.

        Section 522(f) and Judgment Liens in Chapter 13 bankruptcy

        Judgment liens, where for example, a credit card won in court against you and then liened your home, can be avoided in Chapter 13 if they impair an exemption. While there can be a huge benefit to removing a judgment lien in Chapter 13, it also wouldn’t be necessary if it’s a 100% plan. In other words, if you’re paying all your unsecured debt back, turning a secured debt to an unsecured one wouldn’t provide a whole lot of benefit but would increase legal fees. For a discussion – and a judgment lien calculator — see above in the Chapter 7 judgment lien section.

        What is Cramdown in Bankruptcy (Chapter 13)?

        Chapter 13 bankruptcy cramdown is where we can reduce the secured debt of a car to the fair market value of the vehicle. In other words, in Chapter 13, we can “cram down” the loan balance to what the car is worth if the loan was incurred over 910 days ago. The remaining debt gets paid through the Chapter 13 plan at the same percentage as the unsecured debt, potentially saving thousands of dollars on a vehicle loan.

        A bankruptcy cram down example would be if a vehicle loan was $30,000, and the car was only worth $18,000. In Chapter 13, it’s possible to only pay $18,000 for the car loan, and treat the rest of the car debt like credit card debt. Again, this wouldn’t make a lot of sense if it’s a 100% plan or there is some doubt you’ll be able to finish the bankruptcy with the car “in the bankruptcy” because if the case is dismissed, you’re now late on the loan which was being partially paid through the case, which is now ended. You’ll need to ensure you can get to the finish line if you take this route. However, the benefit can be valuable.

        Penrod and Negative Equity

        Is The Negative Equity PMSI?

        Penrod is not just a funny name, but a Ninth Circuit case. The Penrod case addresses trade-ins which had the old loan rolled into the new one, where the old loan is now called negative equity. We just learned that we can cram down a vehicle loan if the balance is more than the vehicle’s value if the debt was incurred over 910 days prior to filing. There is a way to remove the traded-in loan from the current loan, even if this happened in the 910 days before filing.

        Marlene Penrod traded in an Explorer and bought (and financed) a 2005 Ford Taurus. She rolled about $7,000 of her old Explorer loan into the new Taurus financing. Less than 910 days later, she filed Chapter 13 bankruptcy. In the case, she bifurcate, or split, the Taurus loan into two, and said she’d only pay the new Focus price in full as Purchase Money Security Interest (PMSI). The negative equity from the Explorer wasn’t purchase money, and therefore wouldn’t be secured.

        The new finance company objected, and the Ninth Circuit Court of Appeals agreed with Marlene Penrod when it wrote, “In sum, we find that a creditor does not have a purchase money security interest in the “negative equity” of a vehicle traded in during a new vehicle purchase.” In re Penrod, 611 F. 3d 1158 (9th Cir, 2010).

        Penrod and Gap Insurance and Extended Warranties

        Not only can negative equity can be removed from a vehicle loan in a Chapter 13 in the Ninth Circuit, other bankruptcy courts in the circuit have broadened this to other areas. For example, in Washington state, a bankruptcy court has held that Penrod also applies to removing gap insurance and an extended warranty. This is because, like negative equity, they are not part of the purchase money security interest. In re Jones, 583 BR 749 (WDWA, 2018).

        In Jones, the court ruled:

        Accordingly, this Court finds the Option Contracts are not part of the “price” of the Vehicle secured by the PMSI. Like negative equity, the Option Contracts are not sufficiently related to the purchase of the Vehicle. Unlike other expenses listed in Official Comment 3, neither the purchase of optional gap insurance or maintenance contracts are akin to sales tax and license fees, which are not optional but are required in order to obtain the vehicle.

        Jones at 755.

        It went on to write, “The Court concludes that Kitsap Credit Union’s purchase money security interest in the Vehicle does not secure sums advanced to pay for optional gap insurance and vehicle maintenance contracts.” Id. at 759.

        Tax liens in Bankruptcy

        Tax liens in bankruptcy generally don’t go anywhere. In Chapter 7, because they didn’t get paid, they survive the bankruptcy case. A tax lien in bankruptcy (Chapter 13) will have to be paid as a secured debt to avoid it and remove it. This can create feasibility problems in your Chapter 13 bankruptcy case, depending on the size of tax lien and secured debt. As always, discuss with a bankruptcy lawyer.

        In sum

        Liens in bankruptcy are generally not removed, and you don’t get a free car or house. Sometimes liens can be reduced, stripped, or avoided, if the math works out right in various situations. There is a lot more flexibility in Chapter 13 bankruptcy to reduce or even eliminate liens. Arrange a consultation with an experienced bankruptcy attorney in your area to learn your particular options. Thanks for reading.

        means test for chapter 7 bankruptcy

        Bankruptcy Means Test: a calculator, and a trick to pass (2023)

        Posted by Hale Andrew Antico on

        Bankruptcy Means Test for Chapter 7 in California, and Everywhere Else

        Bankruptcy means test for Chapter 7 was created by Congress to decide if you qualify for liquidation or straight bankruptcy. Here is what it is, some answers to common bankruptcy means test questions, and a weird tip on passing the bankruptcy means test and its median income limits (ok, it’s not weird, but I think you’ll find it helpful).

        Historically, there was no bankruptcy income limit

        Before 2005, any income earner could, in theory, file Chapter 7 bankruptcy. There was a time in those days where a single person filing bankruptcy could earn $8,000 a month after taxes and still get a discharge. The credit card companies lobbied Congress to change the law and make it harder to qualify. In response, Congress passed a bankruptcy reform called BAPCPA in 2005. One of the new provisions was to add a means test so that the more someone earned, the harder it became to qualify for Chapter 7.

        What is the Bankruptcy Means Test

        The bankruptcy means test is a long form that asks how much money someone has earned recently. It starts by determining a) what your “current monthly income” is. Then, it compares that to b) a median income limit for their state, for a similar-sized household. If your income is less than the magic number, you pass the means test for Chapter 7. Consequently, you can file bankruptcy that way.

        Figuring Your Current Monthly Income

        Once you’ve figured out which income limit number is the standard for your state, you now need to compare against it your current monthly income. And like most things in bankruptcy, this is not as straightforward as it seems.

        What is Current Monthly Income on the Bankruptcy Means Test?

        How do you calculate current monthly income? Let’s start by saying what it’s not.

        Current Monthly Income is Not

        Current monthly income is not your current income, as reflected from your most recent paystub. Now, that might not make much sense, but this is law, and bankruptcy law, to boot.

        It’s also not what you put on your most recent tax return. While that is helpful information, and your bankruptcy attorney will want that for different reasons, the tax return actually has no place on the means test.

        Current Monthly Income is

        Put simply, the current monthly income is the average of all the income you’ve earned the past six months. Note the word “all” before income. It’s not just the gross income from your paychecks.

        It also counts most government benefits, bonuses you got from work, commissions, overtime, tips, and all those other deposits from Zelle and Paypal on your bank statements (speaking of which, see my list of 12 crucial tips to do before filing bankruptcy).

        But I don’t get to keep my gross income before taxes

        Notice that above I used the word “gross income” from your paycheck. You might think it’s not fair that they’re counting all the money you earned before Uncle Sam takes his cut with taxes and other payroll deductions.

        But that is the way Congress wrote the law, and the form. “Your gross wages” are literally the first words used when it’s time to input numbers on the bankruptcy means test. Don’t worry: there’s a place where we get to subtract taxes later if you earn “too much.”

        Check out our ultimate
        Chapter 7 bankruptcy guide

        Chapter 7 Guide

        Your State’s Median Income

        bankruptcy means test for chapter 7
        A bankruptcy attorney can skillfully complete the bankruptcy means test for chapter 7.

        I use the bankruptcy means test for California, because that’s where I am. If you’re someone else, you’ll use a bankruptcy means test calculator or complete it for your state. (and see below for a link to my simple California bankruptcy means test calculator).

        You ask, “what number do I compare my income against?” The short answer is, the income limit for Chapter 7 is the median income for your state based on your household size. This is a number that changes from state to state, from time to time, and is based on the overall economy.

        For cases filed after November 2022, the annual median income numbers are in a spreadsheet compiled by the Department of Justice Means Testing. In looking at the California median income, the annual one-person household median income now exceeds $60,000. You can read the specific and updated California median income limits that should be in use at least until the middle of 2023.

        Miscellaneous Bankruptcy Means Test Factoids and FAQ

        Does means test income count just me, or my spouse also?

        This comes up all the time. A couple is married, but only one of them is filing bankruptcy. This is where community property comes in. California Family Code Section 760 says that everything acquired by one spouse during the marriage is the property of both. Or put differently, both spouses’ paychecks, even though it has each name on it and maybe the other can’t spend it, is counted in the current monthly income of both spouses. This is regardless of which spouse files bankruptcy.

        Now, it’s true that your spouse doesn’t have to file bankruptcy with you. But even if they aren’t, the chances are very strong that your spouse’s income will count also. And this counts not just your spouse’s pay, but presumably all income from any source, including businesses and that Amazon or Etsy storefront.

        If I earn more than the California median income, does that mean I don’t qualify?

        Let’s say you’ve gone back and looked at every single paystub for the last six complete months. You counted all the overtime. You calculated that bonus, and you’ve input that insurance check and those DraftKings winnings. You annualize the number and you’re over the California median income for your household size (or your own state). If you’re over the line, you could still qualify for Chapter 7 bankruptcy.

        Just because you earn a smidge more than the median income limit for the means test doesn’t mean it’s game over. It just means that you need to do the second part of the bankruptcy means test. This is the part where you get to subtract some of your payroll deductions. It’s a combination of a) actual things you pay; and b) ‘standard deductions’ you get to subtract (regardless of what you actually spend).

        For example, federal and state taxes get backed out; voluntary retirement doesn’t. What you actually spend on health insurance counts; a set amount for rent and clothes is given to you regardless of what you actually spend.

        Explaining all the dozens of line-items of deductions is beyond the scope of this document. However, at the end of ten pages or so of taking things away from your gross pay and current monthly income, we reach disposable income.

        It’s possible that your current monthly income is over the state median income limit, but that your disposable income is low enough to still qualify for Chapter 7 bankruptcy.

        Learn about the median income limits
        used to qualify for Chapter 7 bankruptcy
        and try our Means Test Calculator

        Median Income

        So Do I Qualify for Chapter 7

        It’s common to wonder “Do I qualify for Chapter 7” since not everyone does. It’s really a two-step process. Firstly, do you earn under the median income limit for your state and household size. Secondly, if you don’t, is there enough to pull you back under. And thirdly, can you actually afford to repay some of your debt. This may all sound simple, but as you’ll see, there’s a lot of gray to consider. Just like it’s not really a two-step process.

        Note: If you’ve researched bankruptcy information, and the types of bankruptcies, you may have read that Chapter 7 bankruptcy is a faster, cheaper option to discharge debt. It’s not always better.

        Will I qualify for Chapter 7 if I earn more than the median?

        It’s common to wonder “Do I qualify for Chapter 7” even if you earn more than the median. Don’t panic, even if you earn more than the median income for your state and household size. It’s possible that you may still qualify for Chapter 7. The rest of the bankruptcy Means Test massive form requires a series of numbers filled in for expenses. In some cases, these monthly expense are what you truly spend. In others, it requires some standard expense number put out by the Internal Revenue Service. If you spend more than the IRS allowance, that doesn’t count. However, if done properly by a skilled bankruptcy attorney, it can still be possible to be eligible for Chapter 7 even if you make more than the median income.

        Allowable expenses in the means test

        It can be disappointing to learn that some real-life expenses don’t count in the bankruptcy means test. For example, there’s no box in which to put your fantasy football pool, or your season tickets to the Lakers (or opera). More realistically, we have no box for that money you send to your ex but it’s not court-ordered support.

        There is a box for food and clothes, but you get what the government averages give you, and that’s all. If you spend more than that, you’ve got an uphill battle ahead to prove why that should be allowable. An experienced bankruptcy lawyer will get to know you and your situation, and maybe think of a box that is a good fit for an expense that you may not have considered.

        Household Size and the Means Test

        Household size is a key component in the bankruptcy means test. It’s possible to pass the means test with a larger number, but not be under the income limit with a smaller household size. How many to use for isn’t always clear. For example, if you live with roommates, do you count their income as “heads on beds” even though they live in your home but you can’t access their income? Or if you have 3 kids you help support (one adult away at college, another adult working part-time living at home, and another under 18 but your ex shares custody), is your household size 1, 2, 3 or 4? These are very fact-specific determinations; there is no set answer. Contact a bankruptcy attorney to guide you through the means test.

        The One Weird Trick to Passing the Means Test

        Here it is. One weird trick to getting under the median income limit and passing the means test. And in a word, this is it: timing. In general, maybe you can’t control your pay, you can’t control your income, you can’t turn down overtime. But unless a creditor is about to garnish or foreclose or some other terrible thing, what you can control is when you file bankruptcy. And that has consequences… one of which could be positive if your goal is to get under the limit and file Chapter 7.

        An Online Bankruptcy Means Test Calculator Says I Don’t Qualify

        This lawyer will want to complete the means test

        First of all, don’t buy into those online bankruptcy means test calculators. I won’t, even if you swear it’s accurate. They’re not always spot-on, and every penny counts. Even if the means test calculator is using the correct California median income limits (or wherever), chances are that you didn’t input your FICA deductions, state income tax, (and others) for each paycheck. In the real world, that’s what we have to do. It never hurts to double-check. In fact, I’ll insist upon it.

        So, I will want to manually input all the numbers myself to be certain if you. There are lots of nuances a skilled bankruptcy lawyer can discern. It’s quite possible that after an experienced professional completes the means test you may pass where you thought you didn’t.

        Still, maybe after we plug in all the numbers, you don’t qualify for Chapter 7. No matter how skillfully done, it just might be the truth that you don’t meet the eligibility for the bankruptcy means test for Chapter 7 right now.

        Timing is everything.

        The good news is that someone who isn’t eligible for Chapter 7 now might qualify in the future. Heck, it’s possible you didn’t pass this month, but may next month. There is a strategy in timing, and one element we control is when we choose to file bankruptcy.

        To repeat something you’ve heard a lot by now, if we file your bankruptcy case today, we’re using the last six months. But guess what: filing bankruptcy next month will be a different six months than the current hand we’ve been dealt. If we file bankruptcy in seven months from now, that’s potentially an entirely different six months.

        How does “When” Factor into the Bankruptcy Means Test?

        One element of the Chapter 7 means test is which pay stubs to use for proof of income. The Bankruptcy Code defines “Current monthly income” in section 101(10A)(A) as all the income received in the six months before filing. If we wait to file your case now and file it later, that will be a different six months of income, and some of today’s “old” income will no longer count.

        Warning: there’s a very real downside if you choose to wait. You’re not protected from your creditors until you file. That means they can continue to harass you, give you a lawsuit, garnish your wages, foreclose on your house, and make your life miserable while we wait for the ideal time to strike. You really want to meet with a bankruptcy attorney as soon as possible. Contact me now and let’s chat.

        What’s the worst that can happen if I file Chapter 7 anyway

        If you don’t qualify, omit some of your income, or use the wrong household size, and file Chapter 7 bankruptcy anyway, the Department of Justice will send you a very official letter. It’ll state that in your case the presumption of abuse arises. Bankruptcy abuse is bad. It will then likely file a motion to dismiss the case, and you lose all that time and money. And out all that money, you’ll still need a bankruptcy.

        I’m not eligible for Chapter 7, Can I Still File Bankruptcy

        Not everyone is eligible for Chapter 7. However, even if you don’t pass the means test for Chapter 7, you still deserve debt relief. Consequently, there’s a bankruptcy option for you. You can file bankruptcy under Chapter 13.

        Chapter 13 bankruptcy isn’t terrible: it’s government-operated debt consolidation. You make some payments on your debt, freeze interest so you’re not paying minimums forever, and are protected from lawsuits. You’ll definitely want an experienced bankruptcy lawyer, and guess what: I’ve done hundreds of these.

        Contact us now and let me run your means test

        Reach out to me now. I can complete the bankruptcy means test for Chapter 7. You don’t need to commit to a full bankruptcy. Let’s just see if with all my experience I can get you under the income limits to pass the means test and if you qualify. If you continue with us, we’ll subtract the means test fee from the bankruptcy cost. Call or email — no obligation — and let’s set it up right now.

          Figuring the Los Angeles Country median home price size is like trying to calculate the median coin weight when all we have is data about stack size

          How to Figure the Los Angeles County Median Home Price (2023)

          Posted by Hale Andrew Antico on

          How to Figure the Los Angeles County Median Home Price (2023)

          The Los Angeles County median home price in 2022 and 2023 can be tricky to determine. There are different sources that say different things. It’s not clear which of the many options will be relied upon by courts and trustees for the California homestead exemption. Also, while bankruptcy may seem to be “just forms,” make sure you check out my list of 12 crucial tips to do or avoid before filing bankruptcy.

          2022-2023 update: there seems to be a consensus among local bankruptcy attorneys as to what the Los Angeles County median home price is. More than that, this L.A. median price changes each year. While it’s still untested in court, a lot of the initial uncertainty has cleared up. Read on!

          Warning: This is provided as information only, and is not legal advice. If you are thinking of filing bankruptcy, do not rely upon any information on this webpage. You are assuming all risk and are literally gambling with your home. You will have only yourself to blame if you use the wrong numbers for the Los Angeles County median home value.

          See a bankruptcy attorney for more updated information before you file, because there are ways you can lose the exemption.

          Average is not Median

          los angeles county median home value
          The Los Angeles County median home value is not the mean

          Before we can determine what the Los Angeles County median home price is, we’ll need to know what it’s not. A median is not the same as the average. This takes us back to high school math, but a quick couple of definitions:

          • Average (or mean): this is where you add up the data, and then divide by the number of data points
          • Median: this is where you list all the data, and then take the number which is at the midpoint

          So, as you can see, the median is not the same as the L.A. County average home value.

          The Median Changes Over Time

          Because the median is the midpoint of all the data, each time there’s another home sale, the median changes and moves. You may figure with a random distribution of data, there would be an equal likelihood that future sales will be about half above and half below the median, keeping the median the same. But home prices change over time and are not static, and particularly during a virus pandemic like the COVID-19 coronavirus we had in 2020 and 2021.

          For example, you might find some data sources that list the median home prices for last year, but only through December. Can you assume that houses would sell for the same prices in December around the holidays as they do during the summer when people move a lot and kids are usually out of school?

          Read Our Means Test Guide on Median Income Limits.

          Median Income Guide

          The Los Angeles County median home price is not the same as that for the L.A. area

          Los Angeles County is one of the largest counties in the United States, with over 4,000 square miles. While you may find data for the metropolitan area, that’s very different than the numbers for Los Angeles County. Why? Because L.A County goes from South Bay all the way up to the Antelope Valley and Lancaster. The Los Angeles County median home price is pulling together data from all these.

          Los Angeles County is home to about 10,000,000 people, while the city of L.A. has “only” 4,000,000. If you use only city data, you’re missing out on home values in remote areas in LA County like Littlerock and Pearblossom on the 138 and on the way to Vegas.

          The Median Home Value is not the same as Median Home Sales Price

          You can find some sites which average the values of the homes in the L.A. area, or even Los Angeles County. The problem with that is this: you’re using their own estimate about the Los Angeles county median home values, even those that didn’t sell, when what you’re really needing is the sales price of homes that actually sold.

          After reviewing all the above, you can see that we’re looking for a very specific thing here, and no one website reports the Los Angeles County median home price, or has information that in 2022 is depended upon reliably as the “go to” source for Los Angeles County median home value information. Over time, maybe one place will emerge, but for now there’s just a few “almost there” entries.

          Some Data Sources Which are Close

          which data source can provide the los angeles county median home price
          Which of the various data sources is the right one?

          With all that being said, you can understand the challenge of finding the Los Angeles County median home price. Most websites are using averages, some have only the L.A. area, and none of them let you have access to the data of all the home sales so you can calculate the median yourself.

          Zillow: this company is famous for using its proprietary “Zestimate” to approximate home values. For example, if you go here, you can find what Zillow calls “the typical home value of homes in Los Angeles.”

          But that number isn’t clear…. What does “typical” mean – average or median? Remember, they’re different. Home value or home price? There’s no indication this is relying on sales data. And for what time period? Now, at this snapshot in time, last month, this year, or last year?

          The website doesn’t say what the Los Angeles County median home price is. It also doesn’t say if it includes single-family homes, is only single-family homes, or something else.

          Realtor: This website features real estate, but if you dig down deep enough, you can find market data, research, and trends. It provides data by month, not year, and appears to be providing listing prices, not sales prices.

          Redfin: Redfin is another national real estate website, which tracks listings and sales, and helps connect home buyers to realtors. It has market dataand trends, but seems to be restricted to only Los Angeles city, not all of Los Angeles county median home price info.

          CAR: The California Association of Realtors also has some market data. But it cautions that the data which it is using comes from over 90 associations and counts “single family detached homes only” and “median price changes may exhibit unusual fluctuation.”

          Trulia: Similarly, Trulia is a real estate website that tracks home sales and house prices. It has a way to filter for L.A. and show market information at the bottom of the page, but doesn’t show Los Angeles county median home price or value info. It appears to list home values the way Zillow does, but it doesn’t appear to be relying on sales data.

          News reports: You may find news reports from Los Angeles-based newspapers that report data on home sales prices.

          how to calculate the inflation-adjusted county median home price
          When calculating the inflation-adjusted county median home price, the median coin isn’t the median stack.

          Note: you may find some websites that provide spreadsheets of Los Angeles County median home price data, and lists medians by month. Taking the median of the medians isn’t the same as the median of all the sales data. It’s just creating garbage data. To find the true Los Angeles County median, you’d have to have access to all the sales data. This is something very few people have.

          And that’s the problem: no one person has the data, and different places which are close report different numbers for the Los Angeles county median home value.

          While some of these are close, none of these seem to provide “the” number. Not one can be relied upon, especially for something which involves risking your home.

          Summing up the initial Los Angeles County median home price

          Is there one bottom line source? Not yet, not until it’s litigated, and honestly, a lot of us in 2021 are trying to sift through all this information to make sense of it. Maybe in the months ahead, one choice will crystalize as the one we all rely upon.

          This will likely be after litigation and people guess wrong. Sadly, they will lose their homes in some cases because they guessed wrong on home value. Currently, there is not one number that we can reliably “bet the house” is the median home price in Los Angeles County.

          2022-2023 update: with all that said, it is generally agreed upon that the 2021 and initial Los Angeles County median home price is $600,000, adjusted for inflation.

          But wait, there’s more!

          California homestead exemption, county median price adjusted for inflation

          Recall that the California homestead exemption is the county median price adjusted for inflation. So, each year, each county’s exemption amount is different. Section (b) of the new California homestead says:

          The amounts specified in this section shall adjust annually for inflation, beginning on January 1, 2022, based on the change in the annual California Consumer Price Index for All Urban Consumers for the prior fiscal year, published by the Department of Industrial Relations.

          We don’t know exactly where the county median number comes from, (though the Central District of Calif court seems to endorse CAR but that may or may not be valid evidence in a trustee challenge). Further, the inflation percentage is a different number whose source is similarly mysterious.

          Here is how the inflation adjustment of section (b) would work.

          The California fiscal year ends in June. Therefore, we take the difference between the old June CPI number and compare it to the most recent new June CPI number. What is that percentage?

          CPI and inflation-adjusted California homestead exemption
          CPI and inflation-adjusted figures to use in calculating the California homestead exemption, chart from ca.gov showing increases from June 2020 to June 2022

          For 2022, the difference between the June 2022 number (297.447) and the June 2021 number (284.835) represents a 4.43% increase. Therefore, for counties capped by statute at the $600,000 maximum, the maximum 2022 median home price and homestead exemption would be $626,566.96. This number will change again in 2023, and “will adjust annually, beginning on January 1, 2022.”

          I made a calculator so you can figure out this year’s California homestead exemption amount for any county in California (assuming you have the median sale price number), adjusted for inflation. Better yet, we can calculate next year’s inflation-adjusted homestead exemption if we have June’s CPI numbers already. So bookmark this page and return every few months or so.

          Remember, these Calif CPI figures — and the resulting percentage increase — also impact the inflation-adjusted homestead exemption in counties where the minimum was $300,000, or counties in between that and the max, like Riverside and San Bernardino County.

          Be cautious, use this information at your own risk, as you’re literally gambling with your (or your client’s) house. Thanks for reading.

          Contact us

          If you’re in Los Angeles County, contact us to request a case evaluation, or go ahead and schedule it for free right now.

          Can one person file bankruptcy separately

          One Spouse Filing Bankruptcy: Everything You Need to Know

          Posted by Hale Andrew Antico on

          One Spouse Filing Bankruptcy

          All you need to know about one spouse filing bankruptcy individually or separately

          Can one spouse file bankruptcy without the other?

          Can one spouse file bankruptcy without the other? In consultations, that’s one question I get asked a lot. When we’re married in California, everything is presumed to be joined and shared. So, can a married person claim a bankruptcy? The answer is, “Yes.” Even though someone is married, they have every right to file bankruptcy without the other spouse. They have their own Social Security number and their own credit history. But just because you can do something doesn’t mean you should.

          I’m a bankruptcy attorney practicing in Los Angeles County in California, which is a community property state. All of the information here is specific to California. If you are in a different state, even if it’s community property, this information may not apply, and you should find a bankruptcy lawyer near you. Consult with your bankruptcy lawyer or if you’re in the greater Los Angeles county area, contact me for a consultation.

          If I file bankruptcy individually without my spouse, do I include their finances?

          Yes, in California, a community property state. A debtor needs to disclose all of their assets, and those of the community. 11 USC 541(a)(2). When we get married and say “I do” here, there is a general presumption that every asset or dollar acquired by either person is community property and belongs to both. Calif Family Code 760.

          So regardless of whose name is on the paycheck, bank account, or monster truck, the general marital community property presumption says that if it was acquired during the marriage, it belongs to you both (even a personal injury or wrongful death claim). And when one spouse files bankruptcy, he or she must list the income, stuff, and financial data of the other spouse. For this reason, this factor is no advantage for only one to file, as all the info comes in either way.

          Do I have to list the debts of my spouse if I file bankruptcy separately?

          Family Code Section 910 says, “…the community estate is liable for a debt incurred by either spouse before or during marriage, regardless of which spouse has the management and control of the property and regardless of whether one or both spouses are parties to the debt or to a judgment for the debt.” California FC Section 914(a): “..a married person is personally liable for the following debts incurred by the person’s spouse during marriage: A debt incurred for necessaries of life of the person’s spouse before the date of separation of the spouses.”

          Given that, if you are liable for a debt, it is your debt. The bankruptcy petition tells you to list all your debts. Including those of your husband or wife. The bankruptcy trustee will ask if the papers list all of your debts. You must list all debts you are liable for, and that would include those of your spouse in California. Ask your bankruptcy attorney for more on your specific situation.

          If my spouse files bankruptcy, will it affect me?

          “Will filing Chapter 7 bankruptcy affect my spouse?” This question understandably comes up a lot. Affect is such a broad word. It’s almost certain that the bankruptcy will affect the spouse, though how varies from case to case. It may affect the spouse if it’s a Chapter 13 and the community income — that is both pay checks — are used to fund the debt consolidation. It might affect the spouse emotionally.

          Embed from Getty Images

          It could affect the spouse that their debts should be included in the bankruptcy even though the spouse isn’t filing, and affect the credit of the spouse, and the accounts are closed even though they’re being paid on time.

          If you file bankruptcy and your spouse doesn’t, I won’t need their Social Security number or their signature on anything. While I’m happy to meet them, if they truly don’t want to be involved, they need not attend any consultations or court hearings. However, as their financial information is included because of the community property presumption, it will likely affect the spouse in some way.

          Is there a benefit to me if my spouse files bankruptcy and I don’t?

          There are pros and cons to weigh and assess when trying to decide if only one or both spouses should file. There are benefits. Yes, because one spouse can file bankruptcy for both, that’s a benefit. If your spouse files bankruptcy and you don’t, there is one obvious benefit to you: you don’t have a bankruptcy on your credit report. Their bankruptcy should be eliminating your eligible debts also as nonfiling spouse, and the effect is to discharge the debts of both spouses, husband and wife, even though only one person filed. It can be a two-for-the-price-of-one transaction.

          Will filing bankruptcy hurt the credit of the nonfiling spouse?

          Yes. While the married person not filing (fancy term: non-filing spouse) won’t have a bankruptcy on their credit report, their debts should be in the bankruptcy. And when debts are in a bankruptcy, the accounts are typically closed, and reported negatively to Experian, Trans Union and Equifax credit reports. Not “bankruptcy” bad, but still, it should result in derogatory marks on their credit report since the accounts are no longer paid “as agreed.”

          My spouse is disabled, unavailable, or isn’t capable of testifying. Can I sign or testify for my spouse in my bankruptcy?

          Not without something more. Whoever files bankruptcy has to testify as to the truthfulness of the papers. This is done in two ways: one in signing the papers under penalty of perjury, and a second time at the 341(a) meeting of creditors. If your spouse is physically not available, or mentally or cognitively unable to testify, you cannot testify for them, without some additional permission and evidence.

          Can I use a power of attorney to file bankruptcy for someone else?

          The ability to use a power of attorney for a bankruptcy can vary by jurisdiction and is subject to local rules and practice. For example, some courts allow Power of Attorney. United States v Spurlin, 664 F. 3d 954, 959 (5th Cir. 2011), but see also locally here In re Foster, 2012 WL 6554718 (9th Cir. BAP 2012), which says a POA cannot be used in lieu of signature on a pro se complaint as it is construed as practicing law without a license.

          There’s a possible solution where you get court permission to represent your spouse or someone else. In the Central District of California, this is called a “next friend.” FRBP 1004.1 says a bankruptcy court will recognize a personal representative appointed by another court or the bankruptcy court has authority to appoint a next friend. The standard is that petitioner is unable to litigate his own cause due to mental incapacity and the next friend must have significant relationship with and is truly dedicated to the best interests of the petitioner. Coal. of Clergy, Lawyers, & Professors v Bush, 310 F. 3d 1153 (9th Cir. 2002). There are various types of evidence that may be used to show incapacity. AT&T Mobility v Yeager, 2015 WL 6951291, at 5-6 (E.D. Cal. 2015). This will incur extra work and legal fees, and may not always be necessary.

          If one spouse files bankruptcy, does the other spouse get bankruptcy protection?

          As usual in law… it depends. Chapter 13 bankruptcy is special in that it has something called a co-debtor stay of Section 1301. Both spouses are liable on the debts of the marriage, regardless who who incurred it or manages the finances. Family Code 910. So, both spouses are typically liable for all debts. This means that if you file bankruptcy and your spouse doesn’t, that they’re still protected by the codebtor stay if only one of you files Chapter 13.

          Great, but is there bankruptcy protection if only one spouse files Chapter 7?

          Yes, but not for the nonfiling spouse. Chapter 7 bankruptcy only protects the person or people who filed. And spouses in California, while they are liable on debts incurred during the marriage, are not protected by the automatic stay if they don’t sign the petition and schedules and file bankruptcy. However, once the filing spouse gets a discharge, their property cannot be collected against or it’s a discharge violation.

          So, most creditors don’t collect against the nonfiling spouse, since their assets are the same assets as the person who filed and got the discharge. But beware: Family Code 914 says that the separate property of the nonfiling spouse can be collected on, if they have any (most don’t).

          In most Chapter 7 cases, the creditors don’t collect against the other spouse where one files, but are allowed to, even give them a lawsuit. They just can’t use the judgment from a lawsuit to touch community property assets. As that usually is everything, most collectors don’t bother. But they can.

          As you weigh pros and cons, what is the benefit of certainty in Chapter 7 of both parties being absolutely protected from creditor calls and collections worth? If it’s a lot, is it “bankruptcy on your credit report” a lot? Talk with your bankruptcy attorney. There may be other variables in your unique circumstances.

          Can a lien be placed on my house for my spouse’s debts?

          Generally, yes. Because of the Calif Family Code sections above, both spouses (and their assets) are liable for the debts of the other in a marriage. So, if Spouse A got a big credit card debt, there could be a credit card lawsuit resulting in judgment. A judgment lien can then be attached against the asset which Spouse B also owns (typically community property acquired during the marriage in Calif). Filing bankruptcy and getting the automatic stay would stop the lawsuit, and protect that community asset. 11 USC 541(a)(2)(B).

          Can they garnish my paycheck for my spouse’s debts?

          Again, yes. See above. Both spouses — and their community assets — are liable for debts incurred during the marriage under the California Family Code. A paycheck belongs to both spouses, regardless of whose name is on it. There is also the issue if one innocent spouse can be liable for the fraud of the other. So the general answer is, yes, they can garnish your paycheck for the debts of your spouse, and vice verse.

          Summing up

          The intersection of bankruptcy law and community property confuses many people, including attorneys in California. There is not always one best answer to the question, “is it better for us both to file bankruptcy jointly together, or just one spouse separately.” Is it possible to file individually? Yes. What’s best for you and your unique circumstances? Contact me or set up a free Zoom consultation with the link at the top of this page and let’s go over it together. Thanks for reading.

          ride-through california bankruptcy

          Ride-Through Back in Calif Bankruptcy

          Posted by Hale Andrew Antico on

          Ride-Through Back in California Bankruptcy

          Ride-through is back in California bankruptcy. This is big news for 2022. It restores the right of someone in bankruptcy to be free of personal liability on a car loan in the event of a future default. To be clear, you don’t get a free car in bankruptcy. But if you don’t reaffirm the car debt, and stop paying the car after the bankruptcy discharge resulting in a repo, you won’t owe the deficiency balance.

          The change is part of SB1099, a bill the governor recently signed into law. The new law includes other protections or exemptions, for people filing bankruptcy. The changes take effect on January 1, 2023. Caution: it is likely that this may be challenged by lenders or trustees in court, so rely on this new law at your own risk. More on that below.

          Meaning of Ride-Through Doctrine in Bankruptcy

          ride-through doctrine meaning
          Meaning of Ride-through doctrine: car loan goes thru without adding dirt

          The meaning of the ride-through doctrine in bankruptcy is this: a vehicle can go through Chapter 7 bankruptcy without the debtor being on the hook for the car loan in case of future default after the bankruptcy is done.

          In my ultimate guide on Chapter 7 bankruptcy, I use a car wash as a metaphor for the process as a simple way to explain it. While the bankruptcy carwash is intended to remove much dirt, the ride-through doctrine means that the car owner isn’t forced to add the new road tar to his vehicle when it comes out the other side.

          You’d think that it would be common sense that all debts that existed at the time the debtor files bankruptcy would be discharged in the successful case. With credit cards, that’s certainly true (in most cases). However, a secured debt like that for a car or a house is treated differently. If you want to keep the car, you must stay current on the payments for life of the car loan.

          If, after the bankruptcy, the debtor and car owner loses his or her job and they need to turn in the car or have it get repossessed, what happens with the balance of the car loan? With the ride-through doctrine, the “old” bankruptcy reaches into the future and eliminates the new leftover debt. This is huge, as it can be thousands of dollars for something which was completely unplanned or unforeseen.

          2005-2022: Congress & BAPCPA End Ride-through

          It wasn’t always this way. During the dark years of 2005 through 2022, the ride-through doctrine was dead all throughout the nation. This is because back in 2005, Congress passed major bankruptcy reform called BAPCPA. As part of the sweeping changes, in a huge favor to big banks, Congress ended ride-through for all the people in the land.

          In its place, Congress compelled debtors seeking a new start by filing bankruptcy to sign reaffirmation agreements if they wanted to keep their cars. A reaffirmation agreement is where a debtor (you guessed it) reaffirms their debt in a bankruptcy.

          This means that the person signing the contract is promising to owe the debt and undo the bankruptcy with regard to it. Instead of discharging a debt, a reaffirmation is promising to owe the debt, no matter what. Promising to owe debt is bad, and the opposite of the goal of a successful bankruptcy. Millions of people seeking to be released from bondage to debt were forced to sign contracts owing it, or face losing their car anyway. These were dark times, indeed.

          2023: California restores Ride-Through in Bankruptcy

          But California changed that. In September 2022, a new law was completed which becomes effective in 2023, As part of the wide-ranging changes, California restored ride-through in bankruptcy. With Calif bankruptcy ride-through, failing to sign the reaffirmation agreement isn’t considered a default.

          The pertinent “ride-through” bankruptcy part from the new CA law:

          (2) Neither the act of filing a petition commencing a case for bankruptcy under Title 11 of the United States Code by the borrower or other person liable on the loan nor the status of either of those persons as a debtor in bankruptcy constitutes a default in the performance of any of the borrower’s obligations under the loan, and neither may be used as a basis for accelerating the maturity of any part or all of the amount due under the loan or for repossessing the motor vehicle. A provision of a contract that states that the act of filing a petition commencing a case for bankruptcy under Title 11 of the United States Code by the buyer or other individual liable on the contract or the status of either of those persons as a debtor in bankruptcy is a default is void and unenforceable.

          There it is: a person using Title 11 (which is the Bankruptcy Code) cannot be said to be in default, and any contract that says a person is liable on their car loan in case of default is void and unenforceable. This means there is no more repossession for failure to reaffirm or refusal to sign a reaffirmation agreement. This is how, during 2005-2022, some car lenders repossessed vehicles even if the borrower was current on the loan. The infraction? Failing to sign a reaffirmation agreement. So now you ask: after 1/1/2023, do I have to reaffirm a car loan in California bankruptcy and stay personally liable on the debt? The answer appears to be, “no.”

          Preemption: Supremacy Clause, federal law, and California’s ride-through

          Can a state change, or carve out an exception, to federal law? It remains to be seen whether this portion of the law will be challenged by creditors and car lenders. The strongest argument to challenge California’s bankruptcy ride-through is the Constitution’s Supremacy Clause of Art VI, Sec 2. This would state that the federal bankruptcy laws of 11 USC 521(a)(2) and 11 USC 524 are “supreme” to and therefore preempts California state law, and by applying the Supremacy Clause, the part of the state law which conflicts with federal law is void.

          A rebuttal to this would be that California’s bankruptcy ride-through is not in direct conflict with the Bankruptcy Code or of Article 1, Section 8 of the Constitution’s enumerated powers. California is not making laws about bankruptcy. Instead, the state can claim it is merely clarifying state law, as is its right. It can assert that a state has the right to define what is and is not a “default” in California, and a bankruptcy is not a default. Or whether or not car lienholders can repossess a vehicle, or make debtors owe the leftover deficiency balance on a debt after repo from an old bankruptcy case now closed. It remains to be seen if creditors or trustees act on this, and if so, which is more persuasive to a court of law.

          California’s Ride-Through is a New Day Dawning for Debtors

          new dawn of ride-through is back
          There is a new dawn: Ride-through is back in California

          The dark days of forced reaffirmation are behind us. No longer will a person seeking to become debt-free be coerced to sign a contract promising to owe on a potential future default. No more will hopeful Californians be saddled with thousands of dollars of debt after completing their bankruptcy, unable to file again for a number of years. Never again will people finishing a bankruptcy lose their car even though they were current on payments.

          A new dawn is emerging in California. A radiant era where people filing bankruptcy won’t have to worry about having an old debt survive and burden them as a future liability. A glorious future where someone can seek a new start without compulsion, and have the freedom of a clear conscience, free of worry, and without having old debt burden them.

          Yes, ride-through is back in California bankruptcy!

          Automatic stay and bankruptcy protection

          All About the Automatic Stay, the Ultimate Bankruptcy Protection

          Posted by Hale Andrew Antico on

          All About the Automatic Stay, the Ultimate Bankruptcy Protection

          What is the Automatic Stay definition or meaning?

          Automatic stay is the bankruptcy protection when a new petition is filed with the court. It protects against starting or continuing any debt collection. It’s a powerful provision, and stops all collection activity, maintaining the status quo on the day the bankruptcy papers are filed. Failure to respect the bankruptcy protection can lead to sanctions against the collecting creditor.

          The Automatic Stay definition from the text of Section 362(a)

          The official definition of the bankruptcy automatic stay is in 11 USC 362. Section 362(a) says:

          “…a petition filed under section 301, 302, or 303 of this title… operates as a stay, applicable to all entities of:

          • the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title;
          • the enforcement, against the debtor or against property of the estate, of a judgment obtained before the commencement of the case under this title;
          • any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate…”

          The section goes on, but the quote above is where most of the action in bankruptcy protection comes from.

          Interpreting the automatic stay meaning in simple terms

          Let’s break down what the meaning of the automatic stay is in plain English. Section 362 says that the mere filing of a what? A petition that’s either voluntary, involuntary, or joint (301-303). That pretty much covers most bankruptcy filings. Then what? It stops (stays) the start or continuing most every collection, including enforcing a judgment or trying to take anything from you.

          Bankruptcy protection automatic stay is like a dome over a city
          The bankruptcy protection of the automatic stay is like a magical dome or enchanted shield over you & your stuff

          That’s really broad, and covers almost anything you can think of. It’s like a protective shield around you, your things, and your life against all your debts doing anything to you, the person who filed bankruptcy. Or, to use another simile, the automatic stay is like a dome over a city, where the sun only shines and the birds sing, but outside the shield it’s stormy and dangerous.

          There are a few limits to it, which I explain below.

          When does the Automatic Stay begin?

          The automatic stay is tremendous in that it begins the second the bankruptcy is filed. Why? It’s automatic. File a bankruptcy case, and boom, you’re safe. The fact that the bankruptcy protection starts the moment you file bankruptcy is extraordinary, in a sense.

          “It is elementary that the automatic stay comes into existence automatically and immediately upon the filing of a petition in bankruptcy.” Webb Mtn, 414 B.R.308 (Bankr Ct, Tenn, 2009).

          Normally, in law, if you want something to stop, you have to request that separately. Think of a temporary restraining order. That requires work, time, a justification, and approval. But bankruptcy protection, because it’s automatic, that is, no additional papers need to be filed to get it to kick in, it’s one of the rare exceptions in law.

          You get all the benefits of safety, protection, and peace of mind at the beginning of this legal process. Your creditors have to file lawsuits, wait months or years, get the judgment, and then try to execute on the judgment to take action against you and your stuff. You merely have to begin the bankruptcy legal case before they can finish theirs against you. This is a huge time advantage for the debtor filing bankruptcy.

          How long does the Automatic Stay last?

          The automatic stay starts when you file bankruptcy, and typically lasts for the duration of the case.

          What can end the bankruptcy protection?

          There are a few things that can end the automatic stay:

          • Discharge: When a normal case ends successfully, the debtor gets a bankruptcy discharge and the case is usually closed soon after that. When the discharge is entered, the stay is over.
          • Dismissal: If a bankruptcy case ends unsuccessfully, the automatic stay is over also. The magic dome of sunshine disappears, and the storm clouds come right back. For that reason, dismissal is usually bad.
          • Motion for Relief of the Automatic Stay (MRS or RFS): Creditors have rights also, and if the stay is hurting them unfairly, they can make it go away. Repeat after me: “There is no free car or free house in bankruptcy.” If you stop paying for the house, the mortgage can get through the automatic stay and take your house. Or put differently, if there is a house or car or something you’re financing and you want to keep it, stay current with the payments.

          Wait, back up. After bankruptcy discharge, the stay ends and creditors can collect against me?

          Yes, and no. It’s true that the automatic stay ends when the case concludes with a discharge. The bankruptcy discharge triggers a few legally significant events. First, the discharged debts are no longer legally your obligations. Second, if you had a bankruptcy attorney help you, their representation, per contract, is likely ended. They completed their task and are no longer your lawyer. Third, the automatic stay is also ended, as there is no more active or open bankruptcy case.

          However, the good news is there is something powerful replacing the terminated automatic stay. This new protection is the Order of Discharge.

          Section 524(a) says that a discharge in bankruptcy:

          operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor, whether or not discharge of such debt is waived

          The discharge court order says your debts are gone, and any attempt to collect a discharged debt is a violation. It’s not a violation of the automatic stay, but instead, a violation of a court order. You can and should inform the creditor of this, and if they don’t back off, reopen the bankruptcy and seek sanctions for a discharge violation.

          Violation of the Automatic Stay

          Definition of an Automatic Stay Violation

          A violation of the automatic stay is when a creditor willfully collects after they knew of the bankruptcy protection. The creditor has to have known of the bankruptcy and the automatic stay, or else they can claim as a defense that they had no notice. For this reason, it’s important to document notice of the automatic stay. When the collection company claims they didn’t know of the bankruptcy — and they will — you’ll need to have ample and abundant evidence that they did know, and that they didn’t care and collected against you anyway.

          What if the Creditor doesn’t have Intent to Violate the Automatic Stay?

          Creditor, after being caught with its hand in the cookie jar, may claim that golly, it didn’t intend to violate the automatic stay. The Ninth Circuit Court of Appeals has said, too bad, you intended to do the act. Intent to violate the automatic stay isn’t a requirement. Intent to do the act that violated the stay is all that’s needed. In re Pinkstaff, 974 F.2d 113 (9th Cir, 1992), quoting In re Bloom, 875 F.2d 224, 227 (9th Cir, 1989), In re Pace, 67 F.3d 187 (9th Cir, 1995).

          Examples of Automatic Stay Violations

          Filing a Lawsuit

          One example of violating the automatic stay is where you file bankruptcy, serve the creditor notice of the automatic stay, and maybe even a letter for good measure. Then, three months later, the creditor files a lawsuit against the debtor.

          The lawsuit is the commencement of a judicial proceeding against the debtor that could have been commenced before the commencement of the case or to recover a claim against the debtor that arose before the commencement of the case under this title. Slamdunk violation of the bankruptcy protection.

          Starting a Wage Garnishment

          Another example of an automatic stay violation is where the creditor has already sued the debtor and won in court. Now, armed with a judgment, they’re closing in on collecting. The debtor files bankruptcy, and provides notice of the automatic stay to the debt collector. Next, the collection agent contacts debtor’s employer and starts garnishing the wages.

          In this case, the wage garnishment is an enforcement, against the debtor and against property of the estate (the paycheck), of a judgment obtained before the commencement of the case. Again, another obvious and textbook violation of the automatic stay.

          Foreclosing on a home

          Finally, let’s say the debtor has fallen behind on his or her mortgage. The home loan company is getting cranky, and finally files a Notice of Default and Notice of Sale. Next thing you know, there’s a scheduled foreclosure sale. Debtor then files a Chapter 13 bankruptcy to repay the mortgage arrearages, and provides notice of the automatic stay to the lender. Mortgage company goes ahead with the foreclosure sale, and someone buys the house.

          The home foreclosure is an act to obtain possession of property of the estate (the house) or to exercise control over property of the estate. Straight violation of Section 362 of the Bankruptcy Code. Check and mate, house lender. Automatic stay violation.

          Effect of the Automatic Stay on Acts that Violate it

          In that last example, the home has already been sold to someone else at a foreclosure sale. But it was the result of a stay violation. What is the effect of the sale?

          In California, stay violations are void. The Ninth Circuit Court of Appeals has said that “actions taken in violation of the bankruptcy stay are void.” In Re Gruntz, 202 F.3d 1074, 1081-82 (9th Cir, 2000). Not voidable, void. In re Schwartz, 954 F.2d 569 at 571 (9th Cir, 1992). No action is required by debtor to undo the act. Id.

          The law imposes an affirmative duty on creditors to remedy stay violations by restoring the status quo, and also to establish administrative safeguards to prevent stay violations from occurring in the first instance. In re Dyer, 322 F.3d 1178, 1192 (9th Cir. 2003).

          What if the Stay Violation happens Before Notice is Received

          Knowledge of bankruptcy sufficient for stay; notice doesn’t have to be official

          There is no requirement that a creditor be given an official Court-issued notice or form regarding the bankruptcy case. “[A] party with knowledge of bankruptcy proceedings is charged with knowledge of the automatic stay.” In re Dyer, 322 F.3d 1178, 1191 (9th Cir. 2003).

          Seizing the property doesn’t make it yours

          Now that we have established stay violations are void, what if creditor didn’t know when they violated it? Courts have clearly answered: Petition date controls, not notice.

          The U.S. Supreme Court has ruled that property seized prepetition to collect a debt doesn’t transfer ownership, and it must be returned, pursuant to Section 542(a), even if seized by the IRS. United States v Whiting Pools, Inc, 462 U.S. 198 (Sup Ct 1983).

          Even property taken by the mighty IRS before filing must be returned. With that backdrop, let’s look at cases where property is wrongfully taken after filing, but before creditor had notice of the filing.

          Keeping property seized after filing but before notice is a stay violation

          In the Ninth Circuit, the Bankruptcy Appellate Panel ruled that retention of repossessed car after receiving notice of stay is a willful violation of the automatic stay. “[R]epossession of the debtors’ automobile, while initially inadvertent, became a willful violation of the automatic stay when appellees failed to take any reasonable steps to remedy their violation upon learning of the debtors’ bankruptcy.” In re Abrams, 127 B.R. 239 (B.A.P. 9th Cir, 1991).

          The Ninth Circuit also has held that the knowing retention of estate property violates § 362(a)(3). In re Del Mission Ltd., 98 F.3d 1147, 1151 (9th Cir.1996)(citing Abrams). The appellate court rejected the argument that creditor had no obligation to turn over the property until specifically requested. Id. at 1152.

          “When a creditor lacks notice of a debtor’s bankruptcy, acts in violation of the stay may be inadvertent; however, such acts become willful stay violations when the creditor learns of the debtor’s bankruptcy but fails to take reasonable steps to remedy the violation.” In re Calloway, No. 08-18561SSC, 2009 WL 1564207, (Bankr. D. AZ. 2009) (citing Abrams)

          Other courts outside the Ninth Circuit agree

          Other bankruptcy courts have ruled that even if the creditor didn’t have knowledge, it must take steps to void the violation or face damages. Just to pick one: “Despite having this knowledge, Hunt deliberately refused to cooperate in voiding the sale and reconveying the Trenton property to the Debtor at any time after this date.

          Clearly, these actions were willful and constitute a violation of the automatic stay for which the imposition of damages is appropriate under § 362(k).” In re Tyson, 450 B.R. 754 (Bankr Ct, Tenn, 2011), where buyer of home sold at foreclosure had no notice of automatic stay at time of foreclosure sale, failed to return home, and violated stay and paid damages.

          Wrongful repo cases: repossession after filing without notice violates stay

          A wrongful repo happened after a case was filed but before the repo company had notice. What it did next is what matters: “Rather than comply with its affirmative duty to remedy its stay violation and restore the status quo, Arizona Fleet chose to remain non-responsive, took no steps to confirm or inquire as to the pendency of this bankruptcy case, filed nothing with this Court requesting any form of stay relief, sent the Debtor a notice that it intended to sell the Vehicle, wrongfully continued to maintain possession of the Vehicle, and, without merit, continues to maintain that it was incumbent upon the Debtor to retrieve his wrongfully repossessed Vehicle.” In re Altamirano, Case No. 4:20-bk-11836-BMW (Bankr Ct, AZ, 2022).

          In re Carrigg, 216 B.R. 303 (B.A.P. 1st Cir, 1998), where the repo happened after the bankruptcy was filed without the creditor knowing about it, but creditor failed to return repossessed vehicle after notice of case. The creditor was sanctioned with a willful violation of stay, even though creditor had no had notice of case when vehicle was repossessed.

          Chicago v Fulton, and the Automatic Stay

          What 362 Giveth, Fulton Taketh Away

          It used to be that if someone took something to collect a debt, filing bankruptcy created an obligation for them to return it. All that changed in 2021 when a case percolated up through the courts. The City of Chicago makes quite a pretty penny on impounding vehicles. One person lost their car, filed bankruptcy, and asked for the car back. Chicago didn’t budge. Automatic stay violation? In many places, including here in California and the Ninth Circuit, until now, yes. The Sup Court read the statute, and limited the scope and power of the automatic stay.

          The car repossession taken before filing

          The above repo cases involve a car taken after the case was filed. However, if the car was taken before the case was filed, from now on, it doesn’t have to be returned upon as a possible violation of the automatic stay with notice of the bankruptcy. Chicago v Fulton (In re Fulton), 141 S Ct. 585 (2021).

          In Fulton, the Court said that mere retention, to exercise control, of the property taken before filing (prepetition), without some act that would disturb the status quo, is not a violation of the automatic stay. This means that retention of the car (in this case) isn’t a stay violation, and that something else has to be done to get it back. The Court suggests that Section 542 (turnover) is invoked for an adversary proceeding for turnover of the property. The problem with that is that can take months to resolve. Justice Sotomayor, in a concurrence focusing on simple motions instead, writes that “bankruptcy courts may find it prudent to expedite proceedings or order preliminary relief requiring temporary turnover.” Fulton at 594.

          Not just cars: other seized property falls under Fulton

          When the Supreme Court first decided the case in early 2021, there was the thought (hope?) that maybe Fulton was limited to cars seized by tow yards. That it would be a limited, narrow exception which wouldn’t really impact us here with Los Angeles bankruptcy cases in California and the Ninth Circuit. As Fulton is applied by courts, that’s turning out to not be the case.

          Bank Levy of Accounts and Fulton

          Later in 2021, we saw a court extend it to bank accounts. In Pennsylvania, a lender sued a debtor, won a judgment, and filed a pre-petition attachment lien on bank accounts of the debtor. Debtor filed bankruptcy and then demanded creditor withdraw the attachment as a violation of the stay. A key difference is that, unlike Fulton, creditor was not in possession of property of the estate. No matter. The court said that Fulton requires an act that disrupts the status quo to find a stay violation when it wrote, “the Court finds that Defendants’ refusal to withdraw the valid state court pre-petition attachment of the Penn East Accounts does not violate §362(a)(3). Defendants admittedly took no post-petition affirmative action as to the garnished accounts.” In re Margavitch, 5:19-05353 MJC (Bankr Ct, MD 2021).

          The Ninth Circuit BAP followed Margavitch when it had a bank levy case of its own. The facts were similar: a prepetition lawsuit, and a writ of garnishment on three bank accounts. Later, debtor filed bankruptcy and demanded the creditor instruct the bank to release the funds. After a refusal, debtor claimed it was a violation of the stay. The BAP found that the city’s inaction that merely maintains the status quo does not violate the automatic stay. In re Stuart, 632 BR 531 (9th Cir BAP, 2021).

          The BAP made the point again in 2022 when it said that a lien that existed on petition date where an order granted postpetition about summary judgment regarding it did not disturb the status quo and thus, did not violate Section 362(a)(3). In re Censo, 638 BR 416 (9th Cir BAP, 2022). The rationale is that the automatic stay is inapplicable in lawsuits brought by the debtor, and a defendant can defend itself without an automatic stay violation.

          Wage Garnishments and Fulton

          While Stuart above was a bank account case, the BAP said in footnote 12 that, if it were a wage garnishment case where the creditor captured funds postpetition, the result would be different and a stay violation. Stuart v City of Scottsdale, 632 BR 531 (9th Cir BAP, 2021), citing In re LeGrand, 612 BR 604 (Bankr Ct EDCA, 2020).

          Chapter 13 Codebtor Stay

          What is the Co-debtor Stay?

          Chapter 13 has a codebtor stay, while Chapter 7 doesn’t. Section 1301 and its co-debor stay protects the person who may owe on a debt without that other person having to file bankruptcy. For this reason, Chapter 13 can protect a non-filing spouse better than a Chapter 7 bankruptcy.

          Community liability: you both owe the debts of the marriage

          California’s Family Code 910 says:

          Except as otherwise expressly provided by statute, the community estate is liable for a debt incurred by either spouse before or during marriage, regardless of which spouse has the management and control of the property and regardless of whether one or both spouses are parties to the debt or to a judgment for the debt.

          Further, Calif Family Code 914 says:

          …a married person is personally liable for the following debts incurred by the person’s spouse during marriage …a debt incurred for necessaries of life of the person’s spouse before the date of separation of the spouses.

          Translating that, because California is a community property state, both spouses owe a debt during the marriage, regardless of who is managing the budget, or racking up the debt. You’re in this together.

          So, if one half of a married couple incurred a lot of debt and files bankruptcy in Chapter 13, the other innocent spouse is protected by an automatic codebtor stay. In Chapter 7, the innocent spouse can still be called and harassed and risk losing any separate property (if any) to the spouse’s collecting creditors. Why? FC 914(b) says that the “separate property of a married person may be applied to the satisfaction of a debt for which the person is personally liable pursuant to this section.”

          Section 1301 Co-debtor stay to the rescue

          Now we know that a spouse (or other person who may owe on a debt) is liable for debts during a marriage, even though they didn’t incur them or even have any credit cards. If the spending spouse files bankruptcy, the innocent spouse may be left hanging in Chapter 7. But Chapter 13 has a solution.

          Section 1301 says

          creditor may not act, or commence or continue any civil action, to collect all or any part of a consumer debt of the debtor from any individual that is liable on such debt with the debtor

          There it is. A creditor may not act, start or keep doing something to someone liable on a debt with a debtor. In California, that’s typically a spouse. Automatic stay for the nonfiling spouse in the form of the co-debtor stay is a big benefit to Chapter 13 bankruptcy.

          The hitch: creditors claim to not know about spouses & the codebtor stay

          Amazingly, with all their fancy computers, creditors and their collection companies don’t have a way to know about or track nonfiling spouses. If John Doe files bankruptcy, they’ll flag his account, but they don’t know about Jane Doe, even though she’s listed as a Codebtor in the bankruptcy paper’s Schedule H. They do a scrub or routine check but will say they don’t know Jane’s SSN as a way to flag her, too. So they keep collecting against her, which pressures John, but golly, it’s just an accident.

          This can require “educating” the creditor with notice of the stay before bringing an action for violation of the stay against them for harassing the spouse, in our example, Jane. The fallback position of the fancy slick credit card company will default to becoming Barney Fife. The billion-dollar corporation will morph into bumbling inept two-bit outfit in court who just didn’t know about the spouse and therefore didn’t have notice or any way to possibly avoid this and and thus will seek mercy from the bankruptcy judge for its incompetence. Thus, more notice, more evidence that the creditor knew about the spouse and the bankruptcy, will help you bring your violation of codebtor stay action and prevail.

          Actions which are not violations of the Automatic Stay

          While the bankruptcy protection of the automatic stay is wide and broad, we’ve seen with Fulton that it does have its limits. One other such limit is collection on a nondischargable debt upon property outside the bankruptcy estate.

          That was the issue the Ninth Circuit BAP faced when it ruled, “‘Nevertheless, binding authority is clear that “the automatic stay provisions of Section 362 do not preclude the execution of a judgment, which has been held by the bankruptcy court to be non-dischargeable, upon property of the debtor which is not property of the estate.'” In re Cady, 266 BR 172, 180 (9th Cir BAP, 2001).

          Damages: the Penalty for Automatic Stay Violations

          The automatic stay is one of the few areas in bankruptcy where debtors can get their attorney fees paid by the creditor. The Bankruptcy Code provides at Section 362(k) that:

          an individual injured by any willful violation of a Stay provided by this section shall recover actual damages, including costs and attorneys’ fees, and, in appropriate circumstances, may recover punitive damages.

          Let’s look at these one at a time.

          Compensatory: Actual Damages

          Costs

          Actual damages comes in a couple different flavors. First, it’s whatever the debtor is truly, actually out-of-pocket as a result of the violation of the automatic stay. Judges typically want to see receipts. It can include as mundane things as copying costs, doctor visit copays, and so on.

          Attorney Fees

          In addition, the statute explicitly calls for the debtor getting reimbursed by the creditor for attorney’s fees. The lodestar method for attorney compensation is used in the Ninth Circuit bankruptcy cases. In re Yermakov, 718 F.2d 1465, 1471 (9th Cir. 1983). Lodestar compensation is “strongly” presumed to be reasonable. Burgess v. Klenske, 853 F.2d 687, 691-92 (9th Cir. 1988). The only limit on attorney’s fees is if the work was unnecessary or plainly excessive. The Ninth Circuit Court of Appeals, sitting en banc, concluded that Section 362 authorizes an award of attorney fees incurred in prosecuting an action for damages under the statute, limited by unnecessary or plainly excessive fees. In re Schwartz-Tallard, 803 F.3d 1095, 1101 (9th Cir 2015)(en banc), overturning Sternberg v Johnston, 595 F.3d 937 (9th Cir, 2010).

          Emotional Distress

          Emotional distress damages are available in the Ninth Circuit “if the individual provides clear evidence to establish that significant harm occurred as a result of the violation.” In re Dawson, 390 F3d 1139, 1148-1149 (9th Cir, 2004).

          Punitive Damages

          The statute calls for punitive damages in appropriate circumstances. The definition of “appropriate circumstances” varies by judicial circuit. Here in the Ninth Circuit, it means that punitive damages for violations of the Automatic Stay require “some showing of reckless or callous disregard for the law or rights of others.” In re Bloom, 875 F.2d 224, 227 (9th Cir., 1989).

          The dreaded Wells Fargo case

          Wells Fargo is notorious for their national policy of administrative freeze or holds, officially called “temporary administrative pledges” (which I wrote about in my list of 12 crucial things to do before filing bankruptcy). This is where someone files bankruptcy and has money on account at Wells Fargo. Then the bank freezes the account so the debtor can’t buy groceries. One would think this is a violation of the automatic stay, but it’s not an attempt to collect a debt, but to protect assets of the estate.

          The Ninth Circuit BAP ruled that because defendant exercised control of debtor’s assets postpetition, debtors “have standing to seek sanctions against Wells Fargo pursuant to § 362(k) for willful violation of the stay with respect to their interest in estate property.” In re Mwangi, 432 BR 812, 825 (9th Cir BAP, 2010). But on appeal, the Ninth Circuit Court of Appeals said that the property, while exempt, is property of the estate, but somehow does not immediately revest to the debtor, but must wait 30 days for the FRBP 4003(b)(1) exemption objection time period to lapse. In re Mwangi, 764 F3d 1168 (9th Cir, 2014).

          The court analyzed it as a 362(a)(3) situation (control of property), but if it were the more common commencement or continuance of an action of 362(a)(1), the result likely would’ve been different. So, the Wells Fargo case is not an erosion of the automatic stay.

          Conclusion

          The automatic stay is a powerful tool to protect your client in a bankruptcy. However, you must enforce it, and have proper documentation of evidence. I’ve successfully brought actions against major credit cards for violating the stay; it can be done. if you found this helpful and are faced with a stay violation issue, consider hitting the figurative tip jar. Regardless, thank you for reading, and never stop fighting for your client and the debtor’s rights. You have significant tools and bankruptcy protections here, and you should not hesitate to hold the creditor accountable for flaunting them.

          Remote 341(a) meeting of creditors

          Remote 341(a) Meeting & Zoom: What to Expect, post-COVID (2023)

          Posted by Hale Andrew Antico on

          Remote 341(a) Meeting of Creditors by Zoom: What to Expect in 2023

          Los Angeles Bankruptcy lawyer explains remote 341(a) meetings post-COVID

          Post-COVID, a remote 341(a) Meeting of Creditors in bankruptcy is becoming the standard, instead of in-person. Here’s what to expect. They can be terrifying, nerve-wracking, and unpredictable. As someone who has attended thousands of these in person (after coaching my clients with my list of prefiling do’s and don’ts), I answer your 341(a) questions and share with you what to expect at your 341(a) meeting in a post-COVID pandemic world where Zoom 341(a) meetings are more common.

          What is the 341(a) Meeting of Creditors?

          The 341a Meeting of Creditors is a requirement in every bankruptcy where the debtor (you) gets put under oath and is required to answer questions truthfully about your assets and financial condition. It’s a gathering, like a conference call. While it’s called a 341(a) meeting, it’s not really a meeting, but more like a polite, professional, semi-aggressive grilling.

          Who attends the 341a Meeting?

          You, the debtor, must attend the 341a meeting. Also, there will be a bankruptcy trustee. And of course, all of your creditors will get notified about it. Let’s break it down.

          First, of course you must show up at your 341 meeting, which post-pandemic will likely be a remote 341(a) meeting. Again, this is done by telephone, Zoom, or some other technology. This choice is at the discretion of your Chapter 7 trustee. It varies trustee to trustee, so that’s why this is general; there is no one uniform set way how a trustee runs his or her 341(a) meeting.

          Second, the Chapter 7 trustee will attend. It’s their show, and they will aggressively pursue assets you have or used to have, within the boundaries of the law. They run the meeting, which is more or less like a court deposition, with 20-40 other people able to hear or watch you on the phone or Zoom or Webex or Skype.

          bankruptcy 341(a) meeting of creditors sign
          Bankruptcy 341(a) Meeting of Creditors sign back in the old days pre-2020 when 341a meetings were held in person instead of remote 341(a) by Zoom

          Third, creditors can attend. These are the people to whom you owe money, and they have every right to show up, dial in or call and grill you under oath.

          Fourth, the United States Trustee may call in or attend your remote 341(a) meeting of creditors. The Office of the US Trustee (UST or OUST) is the arm of the Department of Justice responsible for administering bankruptcies fairly and justly. They work with the FBI in the DOJ to investigate bankruptcy crimes, like hiding assets. The goal of the UST is to ensure that justice is being done, and everyone seeking relief is the “honest but unfortunate debtor.” If the US Trustee shows up at your Zoom 341(a), there’s a suspicion of mischief, such as moving your stuff around, making false statements in your papers, lying about income, or some other thing where maybe you’re not entitled to a Chapter 7 bankruptcy discharge… or worse, like prison time.

          Fifth, other debtors will be waiting their turn for their remote 341(a) meetings. There will be about 30 people or so, all listening in, waiting their turn, trying to learn the standard 341(a) questions.

          Finally, your bankruptcy attorney (and a bunch of other bankruptcy lawyers) will be there. This is probably (hopefully!) the only time in your life where you’ll be testifying under oath, with penalty of perjury. You can wing it and hope for the best, but you really want a lawyer who’s personally handled thousands of 341(a) meetings to be with you.

          Do my creditors actually show up at the 341(a) Meeting?

          Generally, your creditors won’t attend. This is because they know the bankruptcy trustee is representing their interests, and will ask you all the questions they would have asked. But they might. They know about the meeting because you have an obligation to list in your bankruptcy petitions or schedules (the bankruptcy papers) every debt you owe, or even might owe. You listed their addresses. When you filed the bankruptcy papers, the court clerk sent them all a notice. It’s each one’s choice if they want to show up and ask you questions under penalty of perjury.

          So, who is the bankruptcy trustee who will be asking me questions?

          In Chapter 7 bankruptcy, the trustee is an attorney, accountant, or other professional who is appointed by the Department of Justice to seek assets of yours they can take for the benefit of your creditors. They are bound by duty to follow the US Trustee handbooks and reference materials.

          Wait, they can take my stuff?

          You bet. That’s the trustee’s primary goal, and what Chapter 7 bankruptcy is all about. You read about “Liquidation bankruptcy” on boring websites, but that’s the whole idea. They can liquidate (fancy word for “sell”) your assets (fancy word for “stuff”), if those assets are beyond the exemptions in your state.

          Then I’ll just give away or sell that thing to a good friend or relative.

          You don’t want to do that. Transfers before a bankruptcy are often fraudulent transfers, and can end up causing a lawsuit for your friend or family, and you’ll lose the thing anyway.

          Where is the 341(a) Meeting of Creditors?

          Ever since the 2020 pandemic, you can usually attend your 341(a) meeting remotely by phone or Zoom.

          So this could be just a phone call. This is super easy.

          Don’t let the format deceive you. The remote 341(a) meeting should be treated like a formal court hearing, as if you’re under oath standing in front of a federal judge. Because if things go wrong, you very well might be.

          How do they even know it’s me?

          The bankruptcy trustee verifies your identity with two forms of identification. When 341(a) meetings were done in person, you would physically hand the trustee or their administrator your unexpired original photo ID and a Social Security card. Now that the hearings are done remotely, you or your bankruptcy attorney will have to provide a copy of these documents (picture ID and proof of SSN) to the trustee. When you go on Zoom, they’ll ask you or your bankruptcy attorney if these are really your documents.

          What do I have to do before a 341(a) meeting?

          Because the meetings are now done remotely, it’s not so simple anymore as just handing over documents. You now have to get the papers and identification to the bankruptcy trustee beforehand. They’ll typically email your bankruptcy attorney how and where to upload the documents. If you gambled and filed bankruptcy without a lawyer, you’ll likely get something in the U.S. mail. Most Chapter 7 trustees use an online portal where documents are uploaded, though it’s possible some will accept them by email.

          What documents do I have to provide to the bankruptcy trustee?

          You already know you need to get proof of your identity to the bankruptcy trustee, one with a picture of your face, and another that verifies your Social Security number. Most bankruptcy trustees have a bankruptcy debtor’s questionnaire. Back when the 341(a) meetings were done in person, you’d fill it out while sitting and waiting your turn. Now that we have remote 341a meeting of creditors, you’ll need to complete this in advance, and return it to the trustee. You also must provide your tax return for the last year filed. Many Chapter 7 trustees want to see your bank statements for all accounts for the months prior to filing. It’s possible the bankruptcy trustee will ask you for more documents like mortgage or car loan statements, property deeds, closing statements from refinances or sales you did years ago, etc. so be prepared for some homework.

          What happens at the 341(a) Meeting?

          On the day of the 341(a) hearing, you’ll connect to the Zoom 341(a) meeting of creditors, or phone in. You’ll mute your line so it’s not chaos and noisy. They call your name, they swear you in, the trustee then questions you like at a deposition, then invites your creditors who attended if they wish to examine you under oath. They often conclude your meeting, but sometimes continue it to a different date so that the trustee can get more documents or information as he or she does due diligence. Oh, and just in case you forgot already: mute your line until your name is called.

          What does a US Trustee 341(a) Meeting Room look like?

          The US Trustee 341(a) Meeting room is a room with chairs facing forward with this Department of Justice seal prominently in the room. This should impress upon you the seriousness and solemnity of the event. Because you’re attending the 341(a) meeting in your pajamas in the comfort of your own home you may be led to believe this is a very casual process. It is not. Look at the seal below. Now, imagine getting a formal letter from the Department of Justice with this picture at the top of it mailed to your house, with a deadline, because of something you said at the 341(a) meeting or put in (or left out) of your bankruptcy papers. This is a serious formal proceeding. Tell the truth about everything.

          DOJ seal for bankruptcy 341(a) meeting rooms
          DOJ seal displayed at bankruptcy 341(a) meeting rooms

          What are the questions they ask at a 341(a) Meeting of Creditors?

          There are questions every person must answer at a remote or Zoom 341(a) Meeting, and often the questions are custom-tailored to you and your situation. When it’s your turn, they call your name. You then and only then unmute yourself. First, they’ll tell you to raise your right hand and then ask, “Do you solemnly swear or affirm to tell the truth, the whole truth, and nothing but the truth?”

          The bankruptcy trustee will then ask some of the following questions. This is not intended to be a complete list, but just to give you an idea of what you may be asked.

          “State your name. Is the address on the petition your current address?”

          “Did you sign the petition, schedules, statements, and related documents and is the
          signature your own? Did you read the petition, schedules, statements, and related
          documents before you signed them?”

          “Are you personally familiar with the information contained in the petition, schedules, statements and related documents? To the best of your knowledge, is the information contained in the petition, schedules, statements, and related documents true and correct? Are there any errors or omissions to bring to my attention at this time?”

          “Are all of your assets identified on the schedules? Have you listed all of your creditors on the schedules?”

          “Have you previously filed bankruptcy?”

          “What is the address of your current employer?”

          “Is the copy of the tax return you provided a true copy of the most recent tax return you filed?”

          “Do you have a domestic support obligation, and to whom?”

          “Have you read the Bankruptcy Information Sheet provided by the United States Trustee?”

          “Do you own or have any interest whatsoever in any real estate?”

          “Have you made any transfers of any property or given any property away within the last four years?”

          “Have you been engaged in any business during the last six years?”

          Note that business can be as small as that side gig you have selling things on Ebay or Etsy, or driving for Lyft. If you do have a business or business income, that opens up other questions. You’ll also get other questions if you own a car, own real estate, bitcoin, life insurance proceeds, claims against anyone, and so on.

          Always tell the truth, and again, even if you think you have nothing to hide, you really want to have an attorney representing you when you’re put under oath, and in any legal proceeding such as bankruptcy.

          How do I prepare for a Meeting of Creditors?

          You already know the bankruptcy petition, schedules, and statement of affairs, as it’s all about you, your life, and your financial condition. And of course, it’s all truthful and complete, listing all your assets, debts, and income. Because of that, there’s nothing to memorize.

          You’ll want to get a good night’s sleep, and get to bed early so you’re well-rested. Before you go to bed, have the Zoom meeting number and password (or phone number and pin pass code) the chapter 7 trustee provided you ready so you’re not scrambling in the morning.

          Also, read the bankruptcy information sheet. It’s often called the green brochure, green sheet, or green pamphlet, since back in the days of covered wagons when we were in person, that’s what it looks like.

          Do I have to tell the truth at the 341(a) meeting?

          I know what you’re thinking.

          What?

          You’re wondering about maybe telling a couple of little white lies and not disclosing assets or income or that one debt to see if you can beat the system.

          Maybe.

          That’s not going to work. You’re under oath in a federal legal proceeding. Tell the truth, and the full truth.

          Yeah but how will they know if I don’t?

          The bankruptcy trustee has government resources, databases, and records, and the UST and Dept of Justice have a budget and resources far greater than yours.

          Also, FBI agents like this investigate bankruptcy crimes.

          FBI agents investigating bankruptcy crimes, maybe.
          FBI agents busy investigating a bankruptcy crime, maybe.

          I was just kidding anyway.

          Just tell the truth, about everything. Do you want to go to jail for bankruptcy crimes like Boris Becker?

          No.

          Then there’s your answer.

          What about Chapter 13 Bankruptcy 341(a) Meeting of Creditors?

          The Chapter 13 bankruptcy 341(a) Meeting of Creditors is similar, but there’s an entirely different focus than the Chapter 7 kind described above. This is because Chapter 13 bankruptcy is different. A Chapter 13 is administered by a (you guessed it) Chapter 13 trustee. Since the purpose of this chapter is to repay debts in a sort of federally-run debt consolidation program, there’s an emphasis on your cash flow, your budget, and your ability to repay. The 341a questions will be similar, but much of it will focus on your paystubs, number of people in your household, employment, and monthly spending. You will almost certainly get a to-do list when the meeting is complete. This punchlist must be completed if your case will get through to confirmation.

          Is a bankruptcy trustee the same as the bankruptcy judge?

          No, they serve different roles. A bankruptcy trustee is an administrator of sorts, and much more closely aligned with your creditors and debts. They are not your attorney, nor advocating for you. Your attorney is of course zealously fighting for you and your rights, and to help you get the best result with the facts presented to them. The bankruptcy judge — and each case is assigned to a bankruptcy judge — is a neutral person whose job is to decide disputes between your attorney and the trustee (or creditors).

          I read that I don’t need an attorney for bankruptcy.

          This is true. Just because you can file bankruptcy without an attorney, it doesn’t mean that you should. Same goes for self-surgery. Please strongly consider retaining one to help you with every step of this process. At the very least, arrange a consultation with an experienced bankruptcy lawyer.

          Summing up 341(a) Meetings

          Remote 341(a) Meeting of Creditors are new, and have their own sets of traps, especially in that it appears so casual and deceptively easy. With these tips and pointers, I hope this helps you navigate the terrain a little bit better.

          And if you already have filed your case, relax, answer the Zoom 341(a) meeting questions honestly, and I hope the process works out for you and that you get the bankruptcy discharge you deserve.

          Thank you for reading.

          sb1099 new california exemptions good news

          SB1099: New 2023 California Bankruptcy Exemptions Increase

          Posted by Hale Andrew Antico on

          SB1099: New California Bankruptcy Exemptions Increase for 2023 | 5 Major Wins

          SB1099, the new California exemptions increase which gives debtors in bankruptcy more protections, is now law. The new California exemptions for 2023 help people in bankruptcy keep more of their assets, including their cars, their home, money, support pay, and sick leave. The bill was signed by the governor yesterday, and takes effect 1/1/2023.

          Note that SB 1099 and the 2023 California exemptions are different from the 2021 increase in the California homestead exemption which is tied to Los Angeles County median home prices. Last year’s homestead exemption boost strictly involved homes. In contrast, the 2023 exemption hikes for California improves protections for homes, cars, savings, support, and accrued leave and wages.

          Caution: as the new law has been in effect for just a few days, it’s likely that creditors and trustees will challenge key portions of it in court. As such, reliance on it and its changes should be done with caution until it’s established with some history and caselaw.

          While the changes in the new California exemptions of SB 1099 are many and wide-ranging, below are some key highlights.

          Home equity appreciation now goes to debtor, not the estate

          The provision

          A key provision of the new California exemptions law is that postpetition appreciation in the home equity of debtors cannot be taken to repay debts. Section 2 of the SB 1099 says:

          [I]n a case where the debtor’s equity in a residence is less than or equal to the amount of the debtor’s allowed homestead exemption as of the date the bankruptcy petition is filed, any appreciation in the value of the debtor’s interest in the property during the pendency of the case is exempt.

          This has the possibility to addressing the horrible, terrible, no-good decision of In re Jacobson, 676 F.3d 1193 (9th Cir, 2012) which provided the perverse result that debtors had a contingent homestead exemption.

          New California exemptions provide more protection for home and appreciation
          New California exemptions provide more protection for homes and their appreciation

          There, the Ninth Circuit ruled, “That right was contingent on their reinvesting the proceeds in a new homestead within six months of receipt. Cal.Civ.Proc.Code § 704.720(b). The Jacobsons did not abide by that condition and thus forfeited the exemption.” Jacobson at 1199.

          Now, with SB1099 becoming law, regardless which way the housing market goes after homeowners file bankruptcy, appreciation in their house is theirs, and not that of the trustee who previously could take it to pay their debts. However, there is a countering argument that the legislature here says exemptions are not fixed on the filing date, which agrees with Jacobson, and thus, perhaps the case and its ruling are still valid. We’ll have to see how that plays out in the courts.

          November 2022 update: Did the Ninth Circuit just chip into Jacobson, in a gradual erosion towards the ruling’s demise?

          A Note on Preemption and SB1099

          Section 541(a)(6) says that the estate is entitled to postpetition appreciation. The Ninth Circuit BAP has held that to be the case, even if there is no equity on the date of filing. In re Viet Vu, 245 BR 644, 649 (9th Cir BAP, 2000). Creditors can challenge the new state law of SB1099 (or at least this portion of it) as being preempted by federal law, and even 9th Circuit authority on the point. It remains to be seen what courts would do.

          Also, 11 USC 521(a)(2) says that a debtor must perform his or her stated intention about the collateral and secured debt with the filed petition. The options in the federal statute are: reaffirm, redeem, or surrender. Lenders can assert that state law SB1099 is preempted by federal law of Section 521. One counter to this is that, by and large, debtors in California have not been reaffirming mortgages, which are also secured debts that fall under 521. Perhaps treating vehicles the same way, pursuant to California statute, will be similarly allowed.

          Ride-through for Cars is Back in California

          Bankruptcy ride-through is where debtors can have their car loan “ride through” their bankruptcy without having to sign a new contact. In 2005, the bankruptcy reform known as BAPCPA required debtors in Chapter 7 bankruptcy to sign reaffirmation agreements if their lender provided one. This meant that the debtor owed the car loan, even if they lost the car to repossession after bankruptcy. With SB 1099, the debtor doesn’t need to sign the reaffirmation agreement, and the car loan can “ride-through” the bankruptcy case. Ridethrough was the norm before BAPCPA, and now in California, it has returned. The ride-through policy protects debtors from being liable for a big debt if they eventually default on the car loan.

          The “ride-through” bankruptcy part from the new CA law helps debtors. In short, no longer is the person in bankruptcy gambling that they won’t suffer some future hardship and lose the car, and still be stuck post-bankruptcy with thousands of dollars in a car loan they can’t afford. Ride-through in bankruptcy for cars is back in California.

          Car Exemption is Increased to $7,500

          The new SB1099 law also increases the car exemption amount to $7500, regardless of which exemption scheme is chosen. The California exemptions have two tracks: in the 703 and 704 sections of the California Code of Civil Procedure. Each section previously has a different amount for protecting equity in a vehicle. Now, regardless which scheme debtors choose, they can protect $7,500 of equity. This is crucially important in this era of record prices for used cars.

          Sick leave & family leave time protected up to $7500

          Family leave, sick leave, and vacation credits are now exempted up to $7,500, as these terms are defined in Section 200 of the Labor Code.

          Alimony and support

          Pre-existing law included an alternative exemption for the debtor’s right to receive alimony, support, or separate maintenance, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor. This new California exemption adds a general exemption matching the existing alternative exemption.

          And there are more.

          New California Exemptions of SB1099 help debtors … a lot.

          While the list goes on and on, these are the key provisions. It amends Section 2983.3 of the Civil Code, Sections 703.140, 704.010, 704.050, and 704.113 of, and to add Section 704.111 to, the Code of Civil Procedure, and amends Section 22329 of the Financial Code, which relates to bankruptcy. The bottom line is the newly-enacted SB 1099 California exemptions protect homeowners, car owners, people receiving support, and sick pay. It’s a win for Californians, and those who lose out are the credit card companies. Rejoice, California!